A league table of the world’s top 250 retailers by turnover published recently by the US National Retail Federation reveals the continued and mounting domination of the global retail market by large food-based groups, led by the undisputed heavyweight champion Wal-Mart. Joe Ayling reports.
Publication of the US National Retail Federation’s top 250 global retailer rankings provides further evidence of the continued and increasing domination of the global market by food-based retailers. The rankings reveal that almost 60% of the companies in the top 250 were food-based – including supermarket, hypermarket and discount store chains, as well as cash and carry, warehouse and convenience store operators.
While Tesco was among the fast climbers, rising to sixth, and Costco, finished seventh in the list, Wal-Mart Stores not surprisingly retained its top spot, with a stupendous US$288bn in sales. In fact, Wal-Mart’s turnover represents 10% of the combined sales of the remaining 249 companies. Carrefour SA took second place, although with sales of $90bn for the same period, it was not exactly a close-run affair.
In fact, food retailers represented nine out of the top ten companies, with Metro AG, Kroger, Target Corp, Koninklijke Ahold and Aldi, all maintaining their top ten positions. Moreover, in spite of the domination of the big food retailers, further expansion and greater dominance of the retail market can be anticipated.
“Wal-Mart and Tesco are organisations with quite considerable growth ahead of them and Wal-Mart grows at the equivalent of one Tesco a year,” Clive Black, market analyst and head of research at Shore Capital, told just-food. “Those two companies will continue to accelerate ahead of the market in general. Other frontrunners, including Carrefour and German retailers Metro AG and Schwarz Untenehmens Treuhand KG, are expected to open at a much slower rate. Carrefour’s retraction from markets in Korea, Mexico and the Czech Republic are signs of this happening.”
The list, published in the Global Powers of Retailing 2006 report, compiled by Deloitte for NRF’s Stores Magazine, shows that the top ten global retailers, constituted 28.8% of the combined revenue of all 250 companies. However, interestingly given the growth of companies such as Tesco and Wal-Mart, this percentage was virtually unchanged from last year, up by just 0.4%. This would seem to imply that the top ten retailers are taking more share from each other than from elsewhere.
Beyond the number crunching, there were some forecasted knock-on effects for consumers and suppliers alike. “As the big get bigger and their market penetration increases around the globe, competition among the major players is having a significant macro-economic impact,” the report stated. “Intensifying competition is exerting downward pressure on prices. In addition, these companies are reinvesting the cost savings resulting from increased scale and efficiency improvements to reduce retail prices. The decline in overall consumer prices means a substantial increase in consumer buying power. Continued expansion by the leading global retailers is also having a big impact on the supplier base. Suppliers are being forced to consolidate and rationalise their brand portfolios in an effort to operate more efficiently.”
China continued as an expanding market for the world’s top retailers, with 29 of the NRF top 250 doing business there during 2004 and a further battle for market share said to be underway. India has also been identified as a future emerging market, with the law banning foreign traders expected by analysts to break down in time.
Meanwhile, Russia was found to be the fastest-growing retail market opportunity among the Central and Eastern European economies. The NRF said that investment risk resulting from poor infrastructure, corruption, and regulatory hurdles had discouraged many retailers from investing in Russia until recently.
Acquisitions were responsible for a number of shifts amongst the ranks of a separate NRF list of the 50 fastest growing retailers 1999-04. For example, Wm Morrison became the UK’s top growing retailer following its acquisition of Safeway Plc in March 2004. It also finished at 31 in the top 250 retailers’ list.
However, most companies in the fastest growing list were in the bottom half of the top 250 for 2004/05, such as US supermarket operator Roundy’s Inc, which topped the fastest growing retailer list, while finishing 202nd in the top 250 list.
Despite Roundy’s success, the NRF suggested that traditional supermarkets could falter as a result of the growth of formats such as discount and convenience stores, although the biggest food super/hypermarket groups are increasingly moving into these growth areas with specialised concepts.
“Although saturated in certain markets, hypermarkets remain a leading format with considerable potential in emerging economies,” the report stated. “Discount stores have continued their rapid expansion, following the hypermarkets and forcing them to lower their prices. Convenience stores are also registering robust growth. As a result, supermarkets, the most popular format among the top 250 retailers, are starting to feel the squeeze from the proliferation of both larger and smaller formats.”
Analysts agree that the expansion of both larger and smaller concepts leaves traditional supermarkets in a difficult position. “It seems a reasonable assertion that supermarkets are the weakest format for the next few years,” said Black. “Hypermarkets provide business expansion into non-food, and convenience stores selling fresh food are more in tune with lifestyle changes. Therefore, you would expect better growth than traditional supermarkets with less space to sell non-food, and less parking available.”
So globalisation and tailored formats appear to be the current winning tactics for the world’s biggest retailers, while the trends shown in the NRF rankings offer little encouragement for traditional supermarket operators.
But perhaps it is Wal-Mart’s domination which remains the most remarkable feature of the current retail scene, ensuring that every retailer in the top-250, from the 250th up to the massive Carrefour, knows what it feels like to have a giant and dominant competitor. There may be some imponderables in the global retail market, but one certainty is that Wal-Mart will be topping the table for many years, and its subsidiary Asda retaining the number two spot in the UK market last week was another sign of US conglomerate opening its stride.