Chicago: For global retailers that are looking to find new consumers away from their saturated home markets, the road to growth is increasingly being paved with Brics.
But Brazil, Russia, India and China—which make up the Bric acronym for hot emerging markets—have differing landscapes in terms of infrastructure, regulation, consumer tastes and how well foreign companies are welcome to the markets, according to a study by Euromonitor International.
That means expansion into at least some of those countries is more about creating long-term opportunities than immediate returns, said Matthew Stych, director of retail research for Euromonitor. “It’s almost like they are putting down a place marker for future growth,” Stych said.
In 2006, the Bric countries accounted for 11% of global retail sales, up 2.4 percentage points from 2001. By the end of 2011, it is expected that Brics will account for almost 13%.
“Brazil, Russia, China and India rank among the most attractive emerging markets, thanks to the huge size of their potential customer bases,” it added.
The Euromonitor study also noted that the markets have grown more important as retailers such as Wal-Mart Stores Inc., Carrefour and Tesco Plc. focus more on specific markets rather than putting down flags all over the world hoping that growth will come.
In the past, some multinational retailers have stumbled when they moved into new markets. Wal-Mart famously failed to connect with German shoppers and eventually left that market, and Wal-Mart and Carrefour both pulled out of South Korea after they failed to open enough stores.
China is already becoming somewhat saturated for some types of retail, especially grocery, in its larger cities, Stych said.
In India, the political clout of local businesses has limited foreign investors from doing more than striking franchising deals, operating warehouse stores such as Metro AG’s Cash & Carry or setting up supply chain operations like a potential deal between Wal-Mart and India’s Bharti Group, Euromonitor said.
“I’m not sure if retailers like Carrefour and Tesco need to fall over themselves to get in right now,” Stych said. “It might be a case to see how it goes for Wal-Mart and the like,” he added.
Brazil has a lot of retailers with a heavy presence, including Carrefour, Wal-Mart and France’s Casino, though, like China, there are opportunities in secondary markets, he said.
“If you are going to get in there, maybe you need to cover the country,” Stych said. “There’s this feeling that there are areas of Brazil that are underserved at this moment.”
As for Russia, it has attracted some foreign retailers, including Metro, Ikea and France’s Auchan. But while the size of the market is attractive, concerns about political uncertainty and other factors have made others slow to enter.
“It’s the unpredictability in Russia that upsets business there,” Stych said. “You never know when your goods are going to be stopped on the border for months on end,” he added.