moving into second-tier cities, helped it rise to No 3 from its No 5 spot last year, according to the 2007 Global Retail Development Index from management consultant firm AT Kearney.
The study based its results on four variables: "country risk," measuring political risk, debt and credit ratings; "market attractiveness," encompassing retail sales per capita, population, infrastructure and regulations; "market saturation;" and "time pressure."
The higher the ranking, the more urgency for retailers to enter the market, according to the study, which ranks the top 30 emerging countries for retail development and focuses on mass-merchant and food retailers.
"If you want to be an international player in retail, these are the markets that demonstrate the characteristics (where) you can be successful," said Laura Gurski, a co-author of the study and partner in AT Kearney's consumer and retail practice.
India has already attracted the attention of global retailers like Wal-Mart Stores Inc., which is working with India's Bharti Enterprises to set up a joint venture for a cash-and-carry business. In India, foreign multiple-brand retailers, which sell diverse brands under one roof, are limited to cash-and-carry and franchise or license operations.
"India's window of opportunity continues to be wide for retail investment and development," the report said. "Once India's window closes for grocery retailers, there will be little opportunity for market domination in the main cities."
The country's growing population of young urban professionals with disposable incomes and the nouveau riche has also made India attractive for luxury retailers.
India has attracted "the low end and the high end ... because of the breadth of the consumer segments that are available," said Gurski.
When variables stay constant, Gurski said, do-it-yourself, apparel and electronics retailers usually enter emerging markets some two years after international grocers establish themselves.
Middle Eastern countries are also represented on the list, with Saudi Arabia ranking No. 10 and United Arab Emirates No. 18. Gap Inc. announced last week it had struck a deal with two franchisees to open Gap stores in Saudi Arabia starting at the end of this year.
Dubai has capitalized on consumer desire for a more Western lifestyle and has established itself as a retail mecca, Gurski said. Despite its focus on luxury, Dubai is "just beginning to be populated by the bread-and-butter retailers of the United States and the Western world," she said.
Retailers that have already established a presence in major Chinese cities like Shanghai and Beijing, or those that have been slow to gain a foothold there, are now looking at less developed markets in second-tier cities, the study found.
"If the markets are saturated, they're looking to make profits in the second-tier cities," Gurski said.
But she cautioned that a separate strategy is needed for the smaller markets since consumer tastes, ability to spend and willingness to embrace new formats may be different than in larger urban areas.