Retailers Look for Long-Term Growth in Emerging Markets, Including China, India and Brazil

The rise of vast numbers of low-income people to the middle class continues to create a massive global marketing opportunity. China is already a bigger market for GM’s cars than its home nation of America. Amazon.com, Avon and McDonald’s would not be the companies they are today without their immense overseas customer bases, and they have barely scratched the surface of their potential growth.

Think of “middle class” as a condition that indicates, at the very least, that a family has a steady flow of a small amount of discretionary income that can be spent on luxuries or non-essential items. Solid entry into the middle class means that a household may own a scooter or a car (instead of walking, or riding a horse or a bicycle). A middle-class family may own modern consumer electronics or be able to pay school tuition for its children.

Rising household income and a growing middle class in emerging nations offer lucrative expansion markets for retail firms headquartered elsewhere (such as leading retailers from Japan, Europe, the U.S. and Australia). However, multiple challenges face firms attempting to break into such markets. In addition to the need to understand local consumer tastes and requirements regarding packaging, displaying and advertising retail merchandise, there are daunting government regulations to overcome, and frequent encounters with difficulties in securing building permits and business licenses. Foreign retailers will eventually do well in these markets, but it is going to be a long haul, requiring patience and significant investment. Meanwhile, consumers are becoming more and more likely to purchase online rather than in physical stores.

Chinese consumers are hungry for ever-widening varieties of products. These new shoppers seek the convenience, comfort and selection offered by Western-style stores. The Chinese government has an official strategy of growing the importance of retail sales to the overall economy. The plan is for China to eventually be less reliant on exports and more reliant on domestic consumption.

Many of the world’s largest general merchandise retailers are growing in China. Walmart operates hundreds of stores in China, through a combination of joint ventures and minority-owned subsidiaries. German grocer Metro and, of course, Carrefour SA, the French discount giant, have all set up shop. Tesco Plc signed a store ownership joint venture with China Resources Enterprises.

Although Chinese retailers of all kinds have the benefit of knowing the ins and outs of their local markets, they do not have the deep pockets, management expertise and scale of the foreign firms. The growing presence of Western retailers has created a healthy competitive atmosphere. In the mid-term, the new competition may drive forward the retail industry in China, as well as further develop the Chinese economy while it assists bottom lines in the U.S. and elsewhere. Although China’s economic growth is slowing, retail spending growth continues to increase.

SPOTLIGHT: Dragon Mart

The Dragon Mart in Dubai is one of the largest Chinese shopping malls outside China. The mall is 0.75 miles long and has 3,950 shops offering everything from cheap furniture to fashion knockoffs to Chinese body products such as soaps, creams and lotions that claim to enhance beauty and health. The enormous facility is stocked by a logistics center next door which is operated by the China Ocean Shipping Company (COSCO), enabling goods to be delivered straight off the Dubai docks and wholesale purchases to be exported to any global destination. The Dubai Dragon Mart location is one of many spread out though the Middle East and Africa. The Dragon Mart 2, a 2.9 million square foot expansion, features 500 new shops, Novo cinemas and another 4,500 parking spaces. In the fall of 2020, faced with rapidly changing consumer needs and habits, Dragon Mart launched a major ecommerce site. Its mall tenants may include their products on the site.

In 2019, India enacted regulations that limit the ability of foreign firms, such as Walmart, to utilize deep price discounts or to streamline their supply chains. The government’s intent is to better protect its millions of small store owners from competition, and to boost the potential success of locally owned chains. Laws foreign retailers to set up outlets through joint ventures but stipulates that a large percent of products sold must be sourced from small Indian firms.

Ikea has been sourcing products in India since 1987. The retailer hopes to invest $1.6 billion in India to open 25 stores over the next several years.

Single brand retailers (e.g., Nike, Reebok, and Apple) are allowed a 51% stake in Indian wholesale outlets. Only a small percentage of India’s retail business is conducted in chain stores so far. Most people shop at tiny “kirana” shops which are independently owned microbusinesses that sell limited ranges of goods. While the middle class is smaller in India than in China, there remains exceptional long-term potential here for retailers.

Significant Indian retail enterprises exist, such as Pantaloon Retail (India) Ltd.’s Pantaloons department stores and Big Bazaar discount hypermarkets, Tata Group’s Westside department stores and RPG Group’s Spencer’s.

Meanwhile, Walmart launched ecommerce operations in India in 2014, and acquired a controlling interest in Indian ecommerce giant Flipkart in 2018. Many firms find India too restrictive at present. Tough government regulations on top of difficulties in the supply chain (such as poor roads and subpar distribution systems) have pushed many companies to invest their time and money elsewhere.

Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum.

Become a Plunkett Research Online subscriber to gain unlimited access to our massive amount of vital industry data and market research.

✔ 100,000 Industry Statistics
✔ 500 Industries Analyzed for Market Size, Profits and Forecasts
✔ 150,000 Industry Executives Profiled
✔ 25,000 Companies Profiled, Ranked and Analyzed
✔ 1,000 Vital Trends Analyzed, totaling 1,000,000 words

Learn More

Retailers Look for Long-Term Growth in Emerging Markets, Including China, India and Brazil, Business and Industry Trends Analysis

A Representative List of Organizations that Have Used our Research and Products:

How to access Plunkett Research data.

What data challenge can we help you solve today?

Take a Tour

Contact

Testimonials