When it comes to global retail market potential, Asia holds the most promise.
Four of the five countries ranked for greatest retail development in A.T. Kearney’s 2016 Global Retail Development Index were in Asia—and sizeable populations coupled with greater retail sales will continue to drive that growth. Africa, however, may possess the greatest potential.
One silver lining—and a rare constant in this era of retail in flux–is that developing markets hold heaps of growth opportunities for retailers.
Over the last 15 years, since A.T. Kearney started the retail index, the number of people inhabiting the developing world grew 21 percent to $6.2 billion, and retail sales in those countries leaped 350 percent, now accounting for more than half of total retail sales.
“Wealth drives consumption in predictable ways, and modern organized retail and global and regional branded products are an important part of this global change,” the report noted. “As a result, international retailers (and consumer product manufacturers) have relied on developing markets to fuel growth.”
In ranking the top 30 developing countries for retail investment, China ranked first, followed by India, Malaysia, Kazakhstan and Indonesia.
“Despite China’s slowing economic growth, the GRDI’s top-ranked country remains one of the most attractive global retail markets,” Hana Ben-Shabat, A.T. Kearney partner and co-author of the study, said. “The economy is gradually shifting from an investment-driven model to one driven by consumer consumption. The growing middle class coupled with strong demand from inland and lower-tier cities and the loosening of the one-child policy will continue to drive growth over the next 10 years.”
Total retail sales for China in 2015 were $3.05 trillion. E-commerce has also grown in Asia, rising 35.7% last year to $878 billion, and China’s share in global online sales is 52.5%.
The official lunch of the ASEAN Economic Community (AEC) started this year, creating a $2.6 trillion market with a population of more than 622 million. Full implementation is far off, but A.T. Kearney thinks member countries could see regional GDP jump 5 percent by 2030. The still-pending TPP, once ratified, could boost GDP for Vietnam by 10 percent and Malaysia by 8 percent.
Despite retail sales down 3.4% to $93 billion, Malaysia’s business friendliness secured its third-place spot on the index. Hypermarkets are hot, according to the report, talk of launching a TV shopping network are ongoing and Kuala Lumpur is flooded with retail space, prompting further development in other areas.
For India, its high marks came as a result of GDP growth, improved ease of doing business and better clarity for foreign investment regulations.
Mike Moriarty, A.T. Kearney partner and co-author of the study, said, “India is now the world’s fastest-growing major economy, overtaking China, and retail demand is being fueled by urbanization, an expanding middle class, and more women entering the workforce.”
Africa had six Sub-Saharan countries ranked in the 30-strong index, and according to A.T. Kearney, the region’s potential is massive and unmistakable.
“Africa stands out as one of the GRDI’s most promising regions. Three North African countries are in the top 30, with Egypt’s 30th-place ranking standing out as its country risk slowly decreases and a fast-growing middle class becomes more accessible to international retailers,” according to the report. “Meanwhile in Sub-Saharan Africa, six countries make the rankings, reflecting the huge yet still untapped potential of the region.”
Underserved markets with increasing economic stability—Cote d’Ivoire, Zambia and Ghana made the list for the first time this year as hunger for modern retail ramps up, household incomes increase and the middle class rises.