Blog: BRICs who? All hail the next generation of emerging markets
Sam Webb | 27 September 2011
Invest in China? Yawn. Launch in Russia? Old hat. Open up in Brazil? Idiota!
I am, of course, exaggerating, as the BRICs nations are still rife with opportunity, but day two of the World Retail Congress in Berlin saw experts discussing the opportunities and challenges presented by the new emerging economies.
This morning (27 September), financial firm Deloitte presented a report called 'Hidden Heroes', which identifies the world's next generation of retail markets (interestingly, half of which are in Africa) and discussed the findings with a panel of experts.
According to Deloitte, the ten countries - Algeria, Kazakhstan, Kenya, Morocco, Nigeria, Pakistan, Peru, Serbia, South Africa and Vietnam – have a variety of positive characteristics. The company pointed to a growing middle class, an openness to investment and an undeveloped modern retail environment. It also, wisely, cited numerous barriers to entry, such as undeveloped power and transport infrastructures and scattered populations.
So what must retailers do to make sure they thrive if they target these opportunities? Three clear themes arose from the panel – be local, arrive first, get real estate.
Eduardo Carriquiry, commercial vice president of the Peruvian arm of South American retailer Ripley, said many companies try to replicate their domestic model when they enter a market and advises working with an established local partner.
He said: "You would be amazed at the mistakes made by some international companies. Successful local companies have the advantage of knowing what's going on in the market. My biggest recommendation would be to hire local talent."
John Fraser, an executive within South African retailer Woolworths Holdings' international operations, added that acquiring real estate and being first into the country offers a huge competitive advantage but warned that poor transport infrastructure in countries like Kenya can derail a retailers' efforts.
"The retailer that professionalises the supply chain is going to have a huge advantage," he said.
Dr Ira Kalish, director of global research at Deloitte, says food retailers can compete with existing 'wet' (traditional food) markets in emerging markets by fulfilling the changing needs of retailers in these growing economies.
He said: "The major grocery retailers can provide something that the wet market doesn't, such as air conditioning, having everything under one roof and greater levels of hygiene."
A final piece of insight came from Carriquiry, who said retailers should not focus too heavily on the major cities and explore less developed areas for virgin opportunities. "Many provinces have not been touched by modern retail," he said.
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