Smaller cities in India, China and Russia are emerging as the new hotspots for the retail industry as global chains leapfrog larger cities and enter emerging markets through second-rung cities, says a report by management consulting firm A T Kearney.
“As larger cities in India, China and Russia reach retail saturation, some retailers are entering countries through smaller second- and third-tier cities where consumers are ready to embrace Western-style retail concepts and products thanks to the influence of television, movies and the Internet,” it says.
The sixth annual Global Retail Development Index (GRDI), a study of retail investment attractiveness among 30 emerging markets, ranks emerging countries on a set of 25 variables, including economic and political risk, retail market attractiveness, retail saturation levels, and the difference between gross domestic product growth and retail growth. The index focuses on opportunities for mass merchant and food retailers, which are typically the bellwether for modern retailing concepts in a country.
For the third consecutive year India continued to occupy the top spots on the retail development index in 2007, followed by Russia.
“India being at the top of the GRDI validates the level of activity and enthusiasm we have seen in the marketplace. We anticipate seeing another year of major investments and new retail concepts changing the rapidly evolving organised retail landscape in India, not just in the metros but also deeper penetration in the Tier-II and Tier-III cities,” said Hemant Kalbag, principal, (consumer industries and retail practice), AT Kearney India. “However, retailers should not go into second- and third-tier cities armed with a first-tier strategy,” he said.
China vaulted past Vietnam and Ukraine to place third in this year’s index, largely on the strength of continued growth in consumer spending and retailers moving into smaller markets. Modern retail formats grew between 25 and 30 per cent in India and 13 per cent in both China and Russia in the last year.