Planet Retail: Retail investors look to Asia for new opportunities

• Retailers train their sights on Asia as challenges mount in their home markets
• Asian megacities will dominate the retail investment landscape

“ASIA is by far the fastest-growing region in the world with markets in China, India, Indonesia and the Philippines being among the world’s most dynamic growth spots,” said Planet Retail’s chief economist and general manager Boris Planer (pic above) during Retail Congress Asia Pacific 2016 in Kuala Lumpur.

He was speaking about the fastest growing markets in retail and the potential factors that retail investors should consider before entering a market.

A study conducted by Planet Retail revealed that a staggering 207 million new consumers will be born in Asia over the next five years. This is three times the population of the United Kingdom.

The opportunity is certainly huge as the region is projected to generate US$3.3 billion (RM13.8 billion) in annual retail sales over the next five years. That is seven times the UK’s retail sales.

It is no wonder that retailers in the United States and Europe are looking to the East. They are facing huge challenges around demographic changes such as an ageing society, the erosion of the middle class and the rise of online retail.

But to go global is not as easy as relying on a Western hypermarket like Tesco to carry brands across the globe.

“Unlike 10 years ago, it is essential that brands form partnerships with local retailers to gain access to the limited shelf space in the markets they want to enter,” warned Planer.

However, it is not as simple as picking the top five markets and entering them. Growth is important but retailers also need to consider a stable economic and legal framework to operate in.
“Growth across Asia is booming and while growth itself is fine, you have to consider where that growth is coming from. Is it socially inclusive with income distributed equally? Unfortunately, that is not the case so retailers need to do their homework before investing in these markets,” he said.

Enter the megacity
Planer spoke of the emergence of megacities, many of which are in Asia. Not only are these markets very big but they are growing fast. They are projected to grow between 10%-15% in the next few years and the size of their populations makes them a match for many countries.

“In terms of population, Jakarta is as big as Malaysia while Manilla is as big as Australia and Mumbai is as big as Taiwan,” he said.

These cities have a big advantage over countries because they have much higher population densities, a higher income level and efficient access to consumers.

Several factors have encouraged the growth of these cities including the rise of urbanisation with cities recording high population growths fuelled by a combination of domestic and external migration.

As productivity increases so too does income which then raises living standards. This, in turn, means that consumers are more sophisticated and aware of international trends, thus opening new categories and brands in retail.

This has also given rise to the birth of mega urban regions. In China, a project was kickstarted with the aim of connecting the cities and metropolitan areas of Beijing, Tianjin and Hebei to become one mega urban region.

The region is estimated to be as large as 216 thousand square kilometre, which makes it as big as Laos. Economically, the combined cities are said to have the GDP of Turkey or Indonesia.
 
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