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China Tops A.T. Kearney Retail Index, But Latin America is on the Rise

When it’s deliver-or-die, supply chains become the lifeblood of a company. To that end, the fashion industry has embraced technology to navigate today’s hyper-complicated supply chain, with myriad solutions shaping the first, middle and last mile. Call it Sourcing 2.0.

In a sign that China is still on top, the country leads the A.T. Kearney Retail apparel index once again. The Index also showcases several countries from Latin America and the Middle East, illustrating the opportunities available in these markets.

The Index ranks the top 10 developing countries in terms of market attractiveness, retail development, and country risk for their clothing retail industries.

Western apparel retailers have been looking for growth in developing markets, where apparel spending is growing as incomes rise. E-commerce has also been a major growth area, according to Michael Moriarty, a partner at A.T. Kearney and a co-author of the study.

China was the top market due to its market size and strong growth. The market has been shaped by the rise of e-commerce, the growth of fast fashion, and an evolving luxury market. In China, e-commerce is a 6 percent share of total sales, and over three-quarters of those sales are apparel.

Fast fashion retailers have responded aggressively, with Uniqlo opening 65 stores in 2012, with plans to add 100 stores a year until they have 1,000 stores. H&M opened 52 stores and Zara opened 37. Gap has plans to open 35 stores this year.

The luxury market in China is also strong, having surpassed Japan to become the second largest luxury market in the world in 2012. Growth has slowed in that market; however, as more consumers make luxury purchases abroad due to a strong renminbi and lower prices.

Latin America also shows up strongly, with Chile, Brazil, and Mexico all on the list. Gap plans to add 30 stores to its existing 36 by 2014, including its first Brazilian store next year. Zara opened 12 new stores in 2012, giving it a total of 150.

Brazil is the largest apparel market in South America, with $42 billion, versus $14 billion for Mexico. The luxury market alone is supposed to grow to more than $48 billion by 2025. Unfortunately, high tariffs and important challenges with sector expansion may crimp that growth.

Still, with recent data on China interbank lending indicating that the period of expansion in Asia may be drawing to a close, more and more brands and retailers are looking to Latin America to diversify their revenue streams. In many of those countries, including Brazil, that means manufacturing close or paying high tariffs. H&M recently opened its first store in Latin America, in Santiago de Chile, and Mango and other fast-fashion chains also have plans to expand rapidly to take advantage of the new Latin American middle class.


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