AS retailers look to the world's emerging markets to drive their future business success, the quality and range of real estate opportunities has been found as their top operational consideration.
In research by CB Richard Ellis, 40 percent of the some 300 retailers around the globe, representing a combined portfolio of 25,000 stores, said they expect emerging markets to provide their main source of growth over the next five years. Only a quarter said they expect to see growth concentrated in their home market.
India topped the list as the most sought-after emerging market and China ranked eighth, according to CBRE's Global Emerging Markets Survey.
"Rising interest and growing expansion into emerging markets globally is being fueled by rapid growth in consumer spending and the emerging middle class in many of these countries," said Bryn Davies, executive director of retail services, CB Richard Ellis China. "We believe China will rise rapidly as a popular new location for retail expansion."
Four out of five retailers said they will reconsider the decision to enter a market if their favored real estate format - such as shopping centers or stand-alone high street stores - is not available. In fact, 56 percent of retailers base their entry into an emerging market on the availability of suitable property, compared to 46 percent in developed markets.
The presence of a franchise or local partner is another key consideration, as this can enable retailers to penetrate a market more rapidly.
India has been identified as the most sought-after emerging market, with 27 percent of international retailers surveyed having opened their first store in India in the past year or planning to do so imminently. The country is considered particularly attractive because of the size of its market compared to its low presence of international retailers. With foreign ownership rules being gradually relaxed, foreign investment is also now possible, allowing single-brand retailers to own up to 49 percent of their India operations.
Ukraine and Russia also rank highly in the survey, in second and third positions respectively. Ukraine, in particular, benefits not only from its own rapid economic growth but also from its proximity to Russia. The survey has witnessed the trend for retailers who have established a presence in a primary emerging destination such as Russia to regard smaller neighboring countries as natural geographic extensions to their current store network. While Moscow has recently enjoyed heightened attention from retailers due to booming consumer spending, the focus is now shifting to secondary Russian cities and to Ukraine.
Another example of this primary/secondary behavior is retailers who first entered Singapore moving into Malaysia, which ranks as the fourth most sought-after emerging market.
Retailers' interest in specific emerging markets also varies according to their product sector and country of origin.
For instance, South Africa is currently the most important market for retailers from the Asia Pacific region, while retailers from the Americas are now looking at Turkey more than other individual markets.