Expanding into emerging markets with small store formats

The growing appeal of smaller format stores and the increasing number of international moves by emerging market retailers are the two key trends revealed in the latest Accenture Globalization Index.

“Retailers are rethinking their investment in opening large stores in new markets, especially when they already have too much space in their home markets. Instead, they are choosing to enter new markets with smaller format and temporary stores (pop-ups) to gauge consumer interest in the brand and the potential success of a permanent store presence,” said Chris Donnelly, Accenture’s Retail Industry MD. “Small and temporary stores are helpful in building the brand and seamlessly complement an online presence. They are also in tune with consumers’ increasing desire for convenience in terms of time and location.”
Grocery retailers led the way for global expansion with 11 market entries in the first quarter, compared to only four market entries in the previous quarter. “Grocers are leading the way with an emphasis on small formats, e-commerce sites and even temporary stores,” the report stated. “These routes avoid the heavy capital investment and the risk of a large and partially redundant store network. They also complement the belief that online penetration in emerging markets could ultimately be higher than in mature markets.”

Emerging beyond their borders
20% of all market entries in the quarter were made by retailers based in emerging markets compared to 0% in the fourth quarter of 2012 and 12% in the third quarter of 2012. Over the three quarters, seven of the nine market entries by emerging market-based retailers have been made into other emerging market countries.
For instance, Indonesian convenience retailer Indomaret opened its first store in South Africa; South African supermarket group Shoprite opened its first store in the Democratic Republic of Congo; and Turkish hard discounter BIM opened its first store in Egypt.
This is a trend that Accenture expects to see growing strongly because the two prerequisites for international expansion are falling into place. “Firstly, it is often driven by growing saturation in the home market, and the fact that emerging markets are becoming more competitive,” the report states. “Secondly, it is dependent on the retailer having the capital and talent resources to make the investment in researching and entering the new market, and many emerging market retailers are reaching this state.”
* The report analyses Planet Retail data for nearly 500 of the largest global retailers and examines their entry into new markets. It found that these retailers entered 25 new markets in the first quarter (16 January – 15 April 2013), up from 17 market entries in the previous quarter (16 October 2012 – 15 January 2013).
You can download the 11-page report (1.2MB) from www.accenture.com/SiteCollectionDocuments/PDF/Accenture-Globalization-Index-July-2013.pdf