A.T. Kearney study reveals Saudi Arabia, Egypt and UAE are promising markets for retailers

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.

This is just one of the findings of the sixth annual Global Retail Development Index™ (GRDI), a study of retail investment attractiveness among 30 emerging markets conducted by management consulting firm A.T. Kearney.

Published since 2001, the GRDI helps retailers prioritize their global development strategies by ranking emerging countries based on a set of 25 variables including economic and political risk, retail market attractiveness, retail saturation levels, and the difference between gross domestic product growth and retail growth. The GRDI focuses on opportunities for mass merchants and food retailers, which are typically the bellwether for modern retailing concepts in a country.

"Successfully entering a new country via smaller cities requires careful identification of cities with consumers who are ready to embrace modern retail formats. Incomes are smaller and products need to be customized for different markets. But with the right strategy, smaller cities can be attractive targets for retailers that missed the 'window of opportunity' in major cities and for established retailers looking for growth," said Robert Ziegler, Principal, A.T. Kearney, Dubai.

While windows of opportunity for global retailers are closing in India, Russia and China, large cities in other countries among the GRDI's top 20 still present tremendous growth potential. Driven by strong retail expansion, GDP growth and consumers' penchant for a Western lifestyle, the Middle East and North African countries made significant advances in this year's GRDI. Saudi Arabia, Tunisia, Turkey, Egypt, Morocco, and the United Arab Emirates are all among the GRDI's top 20 countries this year, giving the region more counties in the top 20 than either Asia or the Americas.

"In the Middle East we can see that population figures catapult Saudi Arabia and Egypt into top positions, while the United Arab Emirates' low risk assessment makes it a very attractive location for retailers in the region, "said Dr. Dirk Buchta, Managing Director, A.T. Kearney, Dubai.

Central and Eastern Europe also placed six countries among the top 20 -- Russia, Ukraine, Latvia, Bulgaria, Slovenia and Croatia. Asia's attractiveness for retail expansion is not limited to just India and China. Vietnam, Malaysia and Thailand also were among the top 20 countries in this year's GRDI. Latin American countries continued the rebound noted in the 2006 GRDI, with Mexico jumping 10 spots on this year's Index to place nine, joining Chile and Brazil in the top 20.

"So much of successful global retail expansion is about timing," said Ziegler. "Identifying markets on the cusp of embracing modern retail concepts and building a presence in them ahead of the competition, remains key."

A.T. Kearney also recommends retailers consider the effect of an available and well-educated labor supply in their expansion decisions. This year that analysis points to Malaysia and Chile as alternate expansion choices because of their labor advantages. Both countries received strong marks in the firm's Retail Labor Index, a measurement of the strength and skills of the country's retail workforce in relation to its position on the GRDI.

2007 A.T. Kearney Global Retail Development Index

Country 2007 Rank/ 2006 Rank/ Change

India 1 1 0
Russia 2 2 0
China 3 5 +2
Vietnam 4 3 -1
Ukraine 5 4 -1
Chile 6 6 0
Latvia 7 7 0
Malaysia 8 14 +6
Mexico 9 19 +10
Saudi Arabia 10 17 +7
Tunisia 11 11 0
Bulgaria 12 21 +9
Turkey 13 10 -3
Egypt 14 20 +6
Morocco 15 28 +8
Thailand 16 12 -4
Slovenia 17 8 -9
United Arab Emirates 18 16 -2
Croatia 19 9 -10
Brazil 20 27 +7
Uruguay 21 N/A N/A
Peru 22 N/A N/A
Philippines 23 N/A N/A
Indonesia 24 N/A N/A
Algeria 25 N/A N/A
Hungary 26 23 -3
Romania 27 22 -5
Lithuania 28 26 -2
Argentina 29 N/A N/A
Colombia 30 29 -1