IndiaRetailBiz

‘India has enjoyed (being at) the peak of the Index for the past few years, mainly due to the steep and consistent rise in the income levels of Indian consumers, but going forward, its inability to open up the FDI regulations for foreign retailers will affect the industry’s competitiveness more than ever before.’ — Saurine M. Doshi, Partner, A.T. Kearney India.

India, which held top spot on Global Retail Development Index (GRDI), an annual study of retail investment attractiveness among 30 emerging markets conducted by management consulting firm A.T. Kearney, has yielded its numero uno position in 2008 to Vietnam– among the fastest growing economies in the South East Asia. In 2007, Vietnam was ranked fourth on the index.

Consequently, India, Russia and China, the top three countries in the GRDI 2007, have dropped to second, third, and fourth place respectively in the 2008 index.

Vietnam’s leap to the top spot has been attributed by the report to strong GDP growth, changes to the country’s regulatory structure favouring foreign investors, and increasing consumer demand for modern retail concepts.

The report states that while Vietnam’s $20 billion retail market pales in comparison to India or China, the absence of competition and 8% growth in GDP make it an attractive destination for global retailers.

In the past seven years, between 2000 and 2007, spending of Vietnamese consumers – among the youngest in Asia, with 79 million below the age of 65 – has grown by over 75%, says the report.

While India, Russia and China remain important retail investment destinations, high real estate costs in large cities and growing competition have decreased their attractiveness and forced retailers to look for opportunities in Tier II and III cities, says the report.

According to this year’s report, sky-rocketing real estate costs, lack of good commercial real estate and complexity of regulations for foreign retailers have begun to shrink the window of opportunity for new entrants to India.

Source: Thomson Financial