India tops retail market index: Study

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In its sixth annual Global Retail Development Index (GRDI) - a study of retail investment attractiveness among 30 emerging markets – global consultancy firm AT Kearney said India and Russia occupy the top two spots in 2007 - as they have for the last 3 years - while China has vaulted into third place, spurred by its booming consumer spending, together with retailers moving into second-tier cities.

The study based its results on four variables: 'country risk', measuring political risk, debt and credit ratings; 'market attractiveness,' encompassing retail sales per capita, population, infrastructure and regulations; 'market saturation;' and 'time pressure.'

The higher the ranking, the more urgency for retailers to enter the market, according to the study, which ranks the top 30 emerging countries for retail development and focuses on mass-merchant and food retailers.

Modern retail formats grew between 25-30 percent in India and 13 percent in both China and Russia in the last year, the study revealed.

Until recently, such rapid growth was confined to the largest cities in each country. However, increased competition in those cities is quickly forcing domestic and global retailers to expand into smaller cities to drive growth.

"As larger cities in India, China and Russia reach retail saturation, some retailers are entering countries through smaller second- and third-tier cities where consumers are ready to embrace Western-style retail concepts and products thanks to the influence of television, movies and the Internet," the study said.

For instance in China, foreign retailers such as Wal-Mart Stores Inc. and Tesco, and Hong Kong-based retailers are branching into smaller mainland cities such as Yuxi, Weifan, Nanchang and Wuhu. In Russia, Carrefour recently announced it is entering the country via tier-two cities. And in India, shopping centre developer Prozone is focusing development on smaller cities in anticipation of growing demand for modern retail outlets.

"If you want to be an international player in retail, these are the markets that demonstrate the characteristics (where) you can be successful," said Laura Gurski, a co-author of the study and partner in A.T. Kearney's consumer and retail practice.

India has already attracted the attention of global retailers like Wal-Mart Stores Inc., which is working with India's Bharti Enterprises to set up a joint venture for a cash-and-carry business. In India, foreign multiple-brand retailers, which sell diverse brands under one roof, are limited to cash-and-carry and franchise or license operations.

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