The second ‘Internationalisation of Retail’ study from the Consumer Goods Forum and Planet Retail shows that major retailers are still becoming more international rather than less so – and at a surprisingly swift rate.
In 2015, the number of countries in which the world’s largest 100 global grocery and health and beauty (H&B) retail chains operate increased more than at any time since 2011.
The top 100 added a net 27 new markets to their international operations in 2015, compared with just 17 in the preceding two years combined. Ongoing consolidation helped increase the average number of markets operated by a top 10 retailer to more than 16 for the first time.
However, even stripping out the effects of consolidation, there was still an increase in the average number of markets operated by the top 100, driven by a spate of organic market entries by leading players.
Planet Retail Global Research Director Robert Gregory says the forces of globalisation are adapting to new economic and geopolitical realities.
“This is evident in the way leading retailers are becoming more selective about the markets they invest in,” he said. “In some respects it’s the reverse of what we saw a decade ago – when leading players could be accused of planting flags in a number of markets on the assumption that rewards would follow ‘in the long term’. This is a welcome development and the beginning of a new era in globalisation – marked by a more heightened regional focus.”
Compared with any other region, Africa and the Middle East has accounted for the largest number of new market entries by the top 100 retailers since 2010. It is now clearly a target for expansion by the largest players in grocery and H&B. The top 10 global retailers are making a number of strategic plays in this region, alongside a raft of smaller players, such as SPAR International (Cameroon, Lebanon and Oman) and Circle K (Egypt).
The study report also indicates that retailers no longer need to invest in bricks and mortar to have an overseas presence. With the explosion of the internet and the emergence of marketplace platforms, big and small retailers are setting up shop internationally. Cross-border partnerships are also paving the way for greater internationalism.
Another trend is a tendency towards expansion within one or two regions as opposed to global expansion. Tesco and Casino, for example, have both withdrawn from selected countries in Asia, but retain strong regional positions in central Europe and Latin America, respectively, as well as in their home markets.
Meanwhile, new regional players are emerging – often small and medium-size retailers with a presence in the region, but looking to take their proposition into new markets.
The report judges it likely that the global presence of leading players will only further increase.
Expected market debuts include the delayed entry of Schwarz Group’s Lidl into Serbia and Lithuania as well as the US – its first stores outside Europe.
ALDI, meanwhile, is expected to debut in Italy and, after its entry was delayed due to red tape, Costco should also finally open its first store in France this year. These expansion plans will be balanced by a simultaneous move to retrench selected overseas networks in order to generate funds and improve focus on improving performance in core markets.