Romania no longer in top 30 emerging countries for retail development, says A.T. Kearney

Romania is no longer among the top 30 most attractive emerging countries for retail development, according to the 2011 edition of the A.T. Kearney Global Retail Development Index (GRDI). The development came after Romania dropped five positions to 28th position in 2009.

The index ranks the retail expansion attractiveness of emerging countries based on a set of 25 variables including economic and political risk, retail market attractiveness, retail saturation levels, and modern retailing sales area and sales growth. The GRDI mainly focuses on opportunities for mass merchants and food retailers.

The most attractive country for retailers in 2011 is Brazil, found the research, followed by Uruguay, Chile, India, Kuwait and China. No Eastern European country made it into the top ten. Albania ranks 13th and Russia 14th. Bulgaria scraped into the list in last place.

Commenting on the study, Michael Weiss, partner of A.T. Kearney’s Bucharest office, told BR that the index aims to show the trends on the retail market and what will happen on the competitive landscape. “What we are saying is that there are other markets that are obviously more interesting – but not every investor might be able to follow them for different strategic and operative reasons. At the same time, in each industry there are laggards following certain trends for their specific reasons,” said Weiss.

In his opinion the key message for the Romanian market is that it is highly saturated, something foreseeable through A.T. Kearney’s life cycle indicator across the years. “Now in this situation it is a strategic imperative for CEOs to understand how to reinvent their business model and adapt it to the local market or what kind of niche models, for example discounters, special small formats etc, are needed to systematically harvest the market,” he added.

In the next couple of years the local market will be less driven by simple expansion and the opening of the same formats as during the 2004-2008 boom period. The focus for the next years will be to achieve a strategic and operative alignment to the local market conditions, thinks Weiss.

According to A.T. Kearney, a marginal short term recovery for 2011 and 2012 is expected in overall revenues. “But as this recovery of retail revenues might not be sufficient nor sustainable, we will see on the short to mid term an ongoing trend towards niche-retailers, for example smaller shop formats, special formats, innovative business models for sales channels and the shake out or exit of certain players in the market. We are not expecting the overall volume of modern trade to increase on the short term, while the traditional markets will decrease,” Weiss concluded.

Nevertheless expansion plans continue to be in the cards for local players at least as far as public statements are concerned. Lidl opened 107 stores last week by rebranding the former Plus Discout unit and company representatives confirmed to Business Review that 2011 will see the opening of the first units built entirely by Lidl, without disclosing their actual number. French DIY retailer Leroy Merlin will open its first local outlet in Bucharest this August and Carrefour should also see the opening of two new hypermarkets this year, with other retailers also likely to join the march.

Simona Bazavan