Global Retail opportunity:
As we keep hearing that there is a great opportunity for Global Retailing in news, blogs, reports etc etc.. It uses to confuse me that how is it possible??? With subprime losses in US, Inflation in Asian market, and consternation in other major markets like Japan, Europe etc. where does this opportunity lie exactly?? But then I came across a report by A.T. Kearney, “Emerging Opportunity for Global Retailers”, which helped me to understand it thoroughly. The report says that since US retailers are suffering from lower same store sales in their home market, they need to move out in order to ensure growth. Now the question is where to grow. If we see Asia market, though weak dollar has triggered inflation here as most of the emerging economies here have large reserves in dollars. But still there overall growth has not been endangered. This is evident from the fact that GDP in emerging economies like India, China, Russia is still expected to top 8% in 2008. And in most of these economies less than 10% of the Retail is organized. This is another opportunity for Global retailers.
Window of Opportunity theory: The theory says that before the window of opportunity opens, investments in a new market may receive a setback due to uninterested crowd, political regulations and incapable supply chain. But in some time the government realizes the power of organized retailing and reduces regulations, consumers’ starts appreciating the formats and services, and ancillary industries like 3PL starts flourishing. After this Window op Opportunity closes as regulations become lenient and most of the global retailers have already entered the market and have capture best real estate as well as favorable place in consumers mind. So, the Retailers who capture market before opening of the window become superior in such markets. And the opportunity cost is higher for the retailers who enter at the later stage. Moreover by the time of opening of window, domestic retailers also realizes the opportunity and so late entrants have to face a stiff competition from them too. This Window of Opportunity is comprised of four stages, opening, peaking, declining & closing. Most of the emerging economies like India, China, Saudi Arabia etc lie in Opening and Peaking stage reflecting the Great Global Retail Opportunity.
Ref: A.T. Kearney, “Emerging Opportunity for Global Retailers” [2008]
-Rajeev Damani.
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August 18th, 2008 at 4:33 pm
Hey Rajeev, Nice post yaar..infact you have answered a lot of questions in my mind, As to why would a global retailer be targeting markets like India, when they themselves are reeling under the subprime losses. I was just wondering, did this study also contain something about new emerging retailing markets from Asian Countires, as this game can be played both ways, and when we talk about the term “global”, It can mean some Indian Retailing going the US way as well, Although sounds out of place right now, but its not impossible. Whats ur take on it?
August 18th, 2008 at 4:58 pm
hi sarthak.. AT KEARNEY calculates a statistics called Global Retail Development Index based on which it identifies top 30 emerging countries for retail development. This index is based on variables like Country risk, Market Attractiveness, Market Saturation & time Pressure to enter the market. and most of the countries in list are Asian Countries which is not a surprising thing. And as far as talking other way.. ya it can be.. But since US retailers who are well established there are already facing so much challenges, i think its not viable for an emerging economy like India to move to such economies which are already saturated. Rather we can explore opportunities in other emerging markets like vietnam, China, Morocco, Saudi Arabia etc which tops the list with India. Remeber the window of opportunity theory dude. Here either windows has just opened or are yet to be opened. But there windows are already closed. Ya… a closed window has to open again so lets wait for the right time.. [;)]
August 18th, 2008 at 5:05 pm
I agree! but a saturated market doesn’t means the consumption has stopped! Moreover its a saturated market for the US retailers, Who even after the out-sourcing boom are not able to cut costs further…which we can achieve! and the Window needs to be jerked a bit in case its jammed!