Top 250 Develop Presence in Emerging Markets (2011)

Nearly 60 percent of Top 250 retailers now operate in more than one country. To get a better picture of the geographic distribution and global expansion of the Top 250, retail activity in 12 geographic sub-regions was tracked. Of the 147 retailers with operations outside their domestic market, 115 (or more than three-quarters) had a presence in more than one sub-region.

The extent to which the world’s largest retailers have expanded internationally can also be seen by comparing the number of Top 250 retailers doing business in each of the geographic sub-regions to the number that are actually headquartered in those sub-regions. In particular, a large percentage of the retailers operating in Central and Southeast Asia, Central and Eastern Europe and the Middle East are not based in those sub-regions. This is in sharp contrast to Western Europe and North America -- mature markets that are home to 80 percent of the Top 250 retailers doing business there.

The Top 250 continue to increase their global coverage by entering new markets. Thirty-eight retailers began operations in a new country in 2009, with a combined total of 57 new market entries involving 42 countries in 11 of the 12 sub-regions. Not surprisingly, no retailers entered the North American market for the first time in 2009.

In nearly half the cases, the new country was located either in Central Europe (14 times, particularly Bulgaria and Albania) or the Middle East (13 times, particularly Kuwait and the United Arab Emirates). This shows that retailers continue to expect a disproportionate share of consumer spending growth will take place in emerging markets in the years ahead.

Four methods of market entry were tracked for this analysis: organic growth, joint ventures, acquisitions and franchising/licensing. Organic growth was the primary method employed; it was used for half (29 of 57) of the new market entries in 2009.

Franchising/licensing was used 42 percent of the time that retailers entered a new country (24 times), and joint ventures were established as the market entry method on four occasions. None of the new market entries in 2009 involved mergers and acquisitions.

Retailers that entered Central European countries did so mostly through organic growth (11 of 14 instances). For expansion into Middle Eastern countries, the primary method of market entry was franchising/licensing (11 of 13 instances).

Despite a growing global footprint, Top 250 performance by level of globalization shows that going global is not a surefire strategy for sustainable growth. Sales growth for domestic-only retailers outpaced retailers with a more global base of operations. On the other hand, retailers with a larger global presence were more profitable.