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Latin America, China Prime for Retail Expansion

Chile is primed for retail expansion as the country nabbed the top spot on the 2014 A.T. Kearney Global Retail Development Index (GRDI) for the first time.

Buoyed by years of economic and political stability, Chile has become one of South America’s most desirable retail environments, the report revealed. In 2013, Chile’s GDP grew 4.4% and it is expected to grow at roughly that rate through 2016. Retail sales in the country reached $98.52 billion last year, and over the next four years are expected to increase a total of 13 percent, according to the report.

Several major investments in malls and new entries by international retailers confirmed Chilean consumers’ appetite for nonessential, aspirational purchases. In late 2013 U.S.-based architectural design firm, tvdesign, partnered with Chilean mall chain, Mall Plaza, to build the capital city Santiago’s new Mall Plaza Egaña. Three more malls are scheduled to open later this year.

Local retailers in Chile are also flexing their muscles, including Falabella department stores, which announced plans to open 215 new stores and 16 new shopping centers across Latin America throughout 2015, while small boutiques and corner stores are cropping up throughout suburban areas, the report claimed.

With Uruguay, Brazil, Panama, Colombia, Costa Rica and Mexico all in the index of emerging economies ready for retail expansion, the study found that Latin America continued to show strength as a regional retail growth market. In addition, e-commerce is growing stronger and more sophisticated in these markets.

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Ranking third, Uruguay is attracting luxury labels thanks in part to high consumption levels. GDP growth of more than 5 percent for the past five years has resulted in higher purchasing power, while its open market has attracted international players like Zara, a division of Spain’s Inditex. Tourism dollars, boosted by the addition of high end hotel chains like Trump International, is said to have added a jolt to the economy as well.

Brazil’s ranking dipped to fifth after two consecutive years in first place mostly due to accelerating inflation and increasing household debt. However, low unemployment and bank default levels demonstrated a strong middle class that continues to make the country a popular retail location, the report noted.

Fast-fashion chain Forever 21 lived up to its agile reputation by opening seven locations across Brazil to compete with the likes of Zara, Gap Inc. and Topshop. Additionally, the country’s e-commerce sector saw double-digit growth as heavy-hitters like Amazon entered the Brazilian market earlier this year.

On the opposite side of the world, China continued to be a retail force moving up two spots in the index to second place. According to the report, retail sales in the world’s most populous country increased 13 percent to $2.6 trillion in 2013. Urbanization, growing disposable incomes and a more lax birth control policy is said to be egging on the sales growth.

However, interest in luxury retailers and high-end department stores is slowing. Instead, Chinese consumers are basking in the luxury of convenience, preferring to shop in malls for their one-stop shopping, dining and entertainment options. The number of national mall chains reportedly grew 20 percent last year.

Chinese shoppers are filling in gaps by shopping online, which now accounts for 8 percent of all retail in the country, the report revealed. In 2013, online shopping in China grew 42 percent year-over-year to $305 billion, claiming the top spot in the Global Retail E-Commerce Index.

Other key emerging markets include Kuwait and the United Arab Emirates, which are seeing massive high-end development projects that will likely bring more consumers to the area, and Malaysia, where online retail is growing as more of the country’s population adopts broadband Internet service. Eastern European countries like Armenia, Georgia and Kazakhstan rounded out the top 10 list as these nations shift toward more modern retail formats.

Since 2001, the GRDI has ranked the top 30 developing countries for retail investment worldwide by analyzing macroeconomic and retail-specific variables that help retailers strategize investment opportunities. Countries are selected based on three criteria: country risk (political risk, economic performance, credit ratings, debt indicators and access to bank financing), population size and wealth.

More than half of the 63 countries, who have at one point made it onto the list since its inception, no longer rank, primarily due to social or political unrest, a stalled economy, or because they have fully developed into a modern retail market.