hidden heroes

7/26/2019 Hidden Heroes

1/9Hidden heroesThe next generation of retail

Hidden

heroesThe nextgenerationof retailmarkets


2/9

Hidden heroesThe next generation of retail

Introduction

The markets

Last year, Deloitte Touche Tohmatsu Limited (Deloitte) and Planet Retail launched the inaugural

Hidden Heroes report to bring attention to ten emerging retail markets (and their retailers) from

around the orld! The premise as simple" hile #hina deser$es all the attention it gets, it does

not deser$e all the attention in the orld! Thus, e looked beyond #hina and identified other

emerging markets including the other %RI#s (%ra&il, Russia and India) that offer great promise!

This year e ha$e cast the net further, going beyond the %RI#s altogether, to bring together a

ne collection of emerging markets! This includes eight ne countries

' lgeria, a&akhstan, enya, *orocco, +igeria, Pakistan, Peru and erbia ' alongside to e

ha$e carried o$er, for good reason, from last year ' outh frica and -ietnam! ll of these

markets are, or ill soon be, on the radar screen of the orld.s leading retailers!

/almart.s entry into outh frica this year has thron a spotlight on frica ' a region that has

typically been o$ershadoed by sia, Latin merica, the *iddle 0ast and 0astern 0urope hen

talking about future retail groth! /almart.s ac1uisition of *assmart, hoe$er, not only gi$es it a

foothold in the key outh frican market but also a presence in some 23 other frican markets '

ranging from %otsana to 4ambia! /ith the orld.s largest retailer no acti$e in the continent, it

seems likely that other leading global retailers ill in$estigate opportunities in the region for

themsel$es!

It is for this reason that the ten Hidden Heroes markets this year include fi$e from frica (lgeria,enya, *orocco, +igeria and outh frica)! /hile these $ary significantly in terms of si&e and

le$el of de$elopment, the one thing they ha$e in common is the fact that they represent

opportunities for groth! ll ha$e fast groing economies, young and groing populations and

fragmented retail sectors! *oreo$er, although traditional forms of retailing are still dominant, a

groing middle class is increasingly demanding branded products and the opportunity to shop in

modern retail formats!

The remaining fi$e markets co$er 0astern 0urope (erbia), sia (a&akhstan, Pakistan and

-ietnam) and Latin merica (Peru)! 0ach of these markets is set to e5perience rapid retail

de$elopment in the coming years, aided by the groing presence of global retailers and a

handful of strong local players!


3/9


In this regard, some of these markets, such as Pakistan, are only no at the

beginning of this cycle, hile others, such as a&akhstan and -ietnam,

ha$e already secured some foreign in$estment and are set to see a hole

host of global retailers enter in the ne5t couple of years!

The retailers

In each of the Hidden Heroes markets e ha$e profiled one retailer! ome of

these retailers are local operations of large global retailers (such as *etro

6roup in Pakistan or Delhai&e 6roup in erbia), hile 7others are smaller

local retailers (such as 8+ in *orocco)! ll are orthy of mention ' either

for being an early pioneer, e5periencing strong groth, or simply for holding

their on in an increasingly competiti$e trading climate!

*ost are looking to e5pand in their respecti$e market and ha$e put in

place ambitious e5pansion plans, meaning that their influence ill likelyincrease in the coming years!

Taking a closer look at these retailers re$eals some strategic and

operational commonalities that link them together!

0arly9mo$er ad$antage ' number of the Hidden Heroes retailers ha$e

been pioneers in their markets! /hether this includes local players such as

8+ in *orocco, upermercados Peruanos in Peru and +akumatt in enya,

or foreign players entering a ne market, such as *igros Ticaret ina&akhstan and *etro 6roup in Pakistan, establishing a presence at an

early stage gi$es retailers ad$antages in terms of securing the best sites,

establishing a brand and learning about local consumers!

Product offer and a$ailability ' The most successful Hidden Heroes retailers

are those able to offer a combination of imported brands, hich are

sometimes hard to find elsehere and appeal to e59pats, and local produce

that appeals to the local population! Retailers such as hoprite in +igeria,

for e5ample, ha$e in$ested in a professional supply chain to ensure good

1uality and belo9a$erage out9of9stock rates! *igros Ticaret in a&akhstan,

meanhile, has also been orking hard ith local producers to increase its

procurement in this area! *etro 6roup in Pakistan sources around :;< of

its products from the country, despite it.s under9 de$eloped nature! Delhai&e

6roup is able to utili&e its on manufacturing facilities to bring products to

market cheaply in erbia!


4/9


PakistanBackground data

Despite relati$ely slo economic groth, considerable political uncertainty, and $ery lo per

capita income, Pakistan is shoing up more brightly on the radar screens of ma=or retailers! That

is largely due to the massi$e and groing population of roughly 2>; million people! lthough the

country is poor, if only a small share has discretionary spending poer, this represents a si&able

market for modern retailers! *oreo$er, the country did e5perience strong economic groth in the

period ?;;@9?;;> thereby boosting consumer spending poer!

lthough the economy sloed in ?;22 due to massi$e flooding, groth is e5pected to be in therange of

39@< in the coming years! /ith rapid population groth, per capita 6DP is therefore e5pected to

gro sloly! Perhaps the biggest hindrance to more rapid groth is the $ery lo le$el of fi5ed

asset in$estment! Instead, consumer spending accounts for roughly A;< of 6DP! hike in

go$ernment ages and pensions, strong agricultural e5ports, income ta5 reforms, and social

programmes had a positi$e effect on domestic consumption lately! Burthermore, a spike in

remittances from o$erseas Pakistanis supported the domestic economy!

griculture is the largest sector of Pakistan.s economy and accounts for ??< of 6DP! It pro$idesemployment to o$er @;< of the total employed orkforce! s a result, the performance of the

agricultural sector is critical for the economy!

Inflation in Pakistan has risen for @? months in the ro! Pakistan.s #onsumer Price Inde5 (#PI) in

*ay ?;22 as up 23!@< year on year! Loer commodity prices may help ease inflationary

pressure! Hoe$er high fuel prices, ta5 e5emption re$ersals, and a eakening currency may

eigh hea$ily on inflation! Inflation is likely to decline in the coming years, yet it ill probably stay

at double digit le$els in ?;22!

Pakistan: Key macroeconomic data

2007 2008 2009 2010

National statistics

Inhabitants mn 2C:!2 2;! 23! 2! 2A!

6DP ED mn 2@?, 2@@, 2CC, 2>;, ?;C,

6DPFca ita ED A;? :AA AC2 2,;? 2,?2

6DP < realC!D 2!D 3!@ @!: ?!:

#onsumer rice>!: 2?!; ?;!: 22!> 2C!C

#onsumer 2;>, 22;, 22, 2?, 2@A,

#onsumer :; :: >23 >CA ::3Retail sales, net>C,C >>,2 :2,2 :>, 2;3,

Retail sales,@>: @:; @A C? 2;


5/9


Source: Planet Retail

GDP and other data presented in annual average exchange rates

Metro rou!

8$er$ie

*etro 6roup has operated cash G carries in Pakistan since 8ctober ?;;>!

The retailer initially planned to enter in ?;;, but its plans ere delayed!

The retailer has since e5panded to fi$e outlets, hich mainly target business

customers such as hotels, restaurants, caterers as ell as small and

medium9si&ed retailers! *any goods are offered in bulk and multi9packs for

large9 $olume purchasing! The range comprises more than ?;,;;; food and

3;,;;; non9food articles and includes ell9knon international brands as

ell as pri$ate label products! ppro5imately :;< of the product range is

sourced in Pakistan!

lthough the economy sloed in ?;22 due to massi$e flooding, groth is e5pected to be in the

range of 39@< in the coming years!

Company mini profle

Metro Group

Key acts

Location

Lahore

Start o operations

2007

Main ormats

Cash & carries

Stores (2010)

5

et sales (2010)

USD170 million

!nternational


6/9

The Pakistan retail scene

The Pakistani retail industry is one of the least concentrated in

the orld! There are fe ma=or chains! Lo rates of car

onership, home refrigeration, purchasing poer and relati$ely

small number of modern retail formats mean that most Pakistanis

shop daily at small neighbourhood mom9and9pop speciality

shops! They are spread across the length and breadth of the

country! Indeed, the numbers of traditional mom9and9pop stores

ha$e actually mushroomed in recent years!

In addition to mom9and9pop stores, street markets, roadside

$endors and hakers operate in all the ma=or cities and $illages

across Pakistan! In many rural areas, this informal sector forms an

important retail channel and holds a critical position oing to their

access to fresh produce! 8$erall, the traditional sector accounts for

the $ast ma=ority of the country.s retail sales! Hoe$er, in the long

term, as competition increases, modern retail formats ill gradually

take an increasing share of the market! The ongoing migration inthe population from rural to urban areas ill help underpin this

gradual shift! Hoe$er, the process ill be slo and modernisation

ill be confined to urban areas!

upermarkets are the most important modern grocery distribution

format in the country at present and it is e5pected that they ill

increase in number and popularity o$er the coming years as

modern distribution channels de$elop! et supermarkets remain in

their infancy in Pakistan, and the fe supermarkets in operationare restricted to the country.s commercial capital, arachi, and its

second9 largest city, Lahore!

Pakistan is an attracti$e market for the international grocers ith

its large and youthful population, the market has huge potential!

lthough relati$ely poor and underde$eloped at present, the

country has e5perienced rapid economic de$elopment in recent

years and incomes are gradually rising! In addition, the retail

sector is still highly fragmented ith fe ma=or chains or strong

local competition! /ith a groing middle9income class (estimated

at about ?C< of the total population), increasing urbanisation,

groing popularity of international food products, and a rising


7/9

number of international restaurants and fast food chains, Pakistan

is emerging as an e5panding market for E and 0uropean

products!

Pakistan has been acti$ely pursuing foreign in$estment and has

remo$ed most restrictions! Boreign firms still re1uire the

go$ernment.s permission to enter, but can on up to 2;;< of a

company and are free to ac1uire local companies! Hoe$er,despite deregulation, foreign in$estors still treat the country ith

suspicion and are concerned about corruption, high duty rates,

smuggling and restricti$e las!lso, the ongoing political instability makes Pakistan achallenging market for /estern retailers!

That said, ma=or 0uropean retail giants *etro 6roup and #arrefour

ha$e taken the plunge! The former has operated cash G carries

since ?;;>, hile the latter has a franchise agreement ith its

*iddle 0ast partner *a=id l Buttaim group since ?;;A! The entry

into the Pakistani market made #arrefour the first hypermarket

operator in the country! t that time, the retailer said it planned to

open at least se$en ne Hyperstar hypermarkets in Pakistan

ithin the ne5t fi$e years!

There are fe local chains of note! The largest chain is the state9

oned Etility tores #orporation (E#), hich despite operating

almost ,;;; outlets is $irtually insignificant, accounting for less

than 2< of the modern sector! E# operates a chain of

neighbourhood stores hich aim to pro$ide affordable, staple

food items to the Pakistani population! Thousands of E# stores

operate in tons and $illages across the country! 8ther retailers

include #anteen Department tores hich is oned by the

Pakistani *ilitary (around 2;; stores) and G+.s (also around

2;; outlets)!

%ecause of the limited financial resources of most consumers,

retailers primarily sell on a cash9only basis! This is likely to remain

the case o$er the ne5t fe years, as change in this area is

occurring only $ery gradually! #redit card use is likely to become

an increasingly important element of personal finance in the long

term, but in the short to medium term the use of credit cards ill be

constrained by Pakistan.s poor economic climate!


8/9


9/9

Binancial credit ' /ith some emerging markets characterised by eak

financial infrastructures and retail banking, a number of retailers ha$e

stepped in to take ad$antage! This gi$es them a crucial ad$antage

o$er ri$als, especially hen it comes to larger purchases!

+akumatt in enya, for instance, pro$ides a range of financial ser$ices

including bill payment ser$ices and cash9back! In *orocco,

meanhile, 8+ offers interest free payments to customers looking to

make big9ticket purchases!

Regional e5pansion ' number of the Hidden Heroes retailers are

local operations of a ider regional strategy! This means they are

backed by strong parent companies illing to in$est and able to suffer

losses on a le$el that smaller local ri$als cannot sustain! In this

category e can include hoprite in +igeria, hich could benefit from

further in$estment if the outh frican parent looks to focus on

promising markets in the ake of /almart.s entry into its home

market!

Lotte hopping meanhile has the ambition to top retailer across sia!

In -ietnam, it could ell use funds to ac1uire a ri$al retailer in the

market in order to boost its presence!

*ulti9format strategy ' %eing able to operate through a number of different formats also

gi$es retailers a degree of fle5ibility to cater for different segments of consumers! Delhai&e

6roup.s Delta * in erbia is acti$ely pursuing such a strategy, ith recent years seeing it

launch discount store and hybrid cash G carryFhypermarket concepts to complement its

e5isting chain of supermarkets and neighbourhood stores!

upermercados Peruanos in Peru also operates a range of formats alloing it target affluent,mid9market and more price9conscious consumers!

number of the Hidden Heroes retailers are local operations of a ider regional strategy! This means theyare backed by strong parent companies illing to in$est and able to suffer losses on a le$el that smallerlocal ri$als cannot susta

hidden heroes

Documents