Emerging Markets, Technology Welcomes You to Modern Retail
Earlier this month had the pleasure to speak to 100+ business leaders from Central, Eastern Europe, Scandinavia, Russia, and the Middle East at a conference in Budapest Hungary. This week's post summarizes some of the key insights from my presentation titled "The Future of Retail".
European Market Analysis
In EMEA, only the Middle East and Eastern Europe have 2018 retail growth forecasts that outpace the rest of the world. The Middle East is the only region in EMEA where 2018 GDP will grow faster than the world aggregate.
Russia is experiencing some spending slowdown, but it is still an attractive market. The country has become more mature in modern retail and consumers don't necessary fully cut spending during turbulent times. Moscow and St. Petersburg are increasingly saturated, but other cities offer opportunities. 42 cities in Russia have more than 500,000 people. Modern retail shopping space for the size of the country is still in short supply. The food sector is experiencing double digit growth and consumer electronics are growing 30%. Luxury brands see Russia as a key market with wealth increasing.
According to the latest AT Kearney Global Retail Development Index (GDRI), "Retailers are taking a step back from rapid expansion strategies as they move into developing markets." In EMEA, the current top countries for retail investment are United Arab Emirates, Turkey, Georgia, Kuwait, and Armenia.
The top 5 European countries with the highest shopping center building pipeline are Russia, Turkey, France, Ukraine, and Italy. For the second half 2013, shopping center growth was double the amount of the first half. The hot spot was Central & Eastern Europe (CEE) with 66% of the projects. By the end of 2014, Russia will replace the UK as the second largest country in terms of open shopping center space. Half of the investment for Turkey is going into Istanbul. Currently 203 shopping center projects are active in Europe. Of these, 127 are in CEE. Ukraine, Turkey, and Russia continue to fuel shopping center development with all three registering double digit growth.
The Technology Forces Reshaping Retail
The "Future of Retail" is bright with the global market continuing to expand both in developed and emerging markets. According to the Economist, the global retail market will nearly double to over $33 Trillion by 2022. Global urbanization will add 1 billion consumers to retail by 2025. Around 600 million of the future shoppers will live in 440 cities from emerging markets.
The pace of technology adoption is dramatically accelerating globally. It took nearly 50 years for electricity to reach 25% of the USA population. The Internet achieved the same market coverage in only 7 years.
Retail is currently in its 4th transformational wave driven by consumer adoption of mobile technology. By 2017, 3.9 billion people will subscribe to mobile services. The numbers of global mobile subscribers are growing 4 times faster than the global population.
The Retail Growth Engine of Europe
Central & Eastern Europe, Russia, and the Middle East are the retail growth engines of Europe. Retailers will face a different type of consumer in these new markets. Traditional long technology adoption cycles have been disrupted by globalization. Mobile devices and social media are already interwoven into the growing middle class of these emerging economies.
Succeeding in these markets will require laser focus on managing the fundamentals and the continued adoption of new technologies that enhance customer experience. Emerging markets, welcome to modern retail.