The retail industry is not benefiting from the major opportunity provided by the world’s poorest four billion people with annual incomes of less than US$3000 pa, which in total accounts for an untapped market of US$5 trillion.
Speaking at the World Retail Congress in Barcelona, Dimitris Tsitsiragos, head of global manufacturing and services with IFC, part of the World Bank Group, outlined the strategies for retailers to ensure that they can benefit from the risks and opportunities provided by low income consumers in the emerging markets, to tap into what is likely to evolve into a major business driver: tailor products, services and technology to the needs of those specific customers; focus on value creation at the community level; goods and services access; partnerships with governments and NGOs.
He described how investment by retailers into emerging markets facilitates the development, both upstream and downstream, in the supply chain and in the financial services sector, for example. And he talked about the extraordinary pace at which retailers from the emerging markets are growing.
“North America has been significantly outpaced by developing markets in growth in retail spending,” he said.
“It is entirely possible we could see retailers from China, India and Russia becoming market leaders well outside their own borders.”
Terry Leahy, CEO of Tesco commented that with the combination of a shrinking world, more empowered consumers and the opening up of new markets that it is now the best time than any other to be a retailer.
He said that the greatest opportunities will come from the customer and consumer, and outlined six consumer trends as the biggest sources of future growth:
1. The desire for simplicity, with life more complex than ever. Companies will not prosper with complex and confusing options – they need to make life easier for customers
2. The demand that retailers should help consumers save time with people working longer hours and finding little time for cooking.
3. Increasing concern about healthy eating, with nutritional labelling being a key driver of demand, and lower fat/salt products providing great opportunities for manufacturers
4. An increasingly global marketplace that will impact far beyond cheap manufactured goods.
5. The explosion of information, creating opportunities for increased efficiency and productivity and creating a richer marketplace.
6. The importance of trust, with the larger the company the harder you work to look after customers and the public interest.
Leahy also identified a seventh issue that he felt could be bigger than any of the others: ‘green consumption’.
“It is not just the expectation of how we do business,” he said.
“The biggest single thing we can do is give customers the tools to make their own contribution.”
Other speakers on the panel included Jim O´Neill, global head of economic research at Goldman Sachs, who identified population growth as key to world economic growth, and that Russia, Korea, Mexico, Vietnam and Turkey are all countries to watch.
Motoya Okada, president of leading Japanese retailer Aeon Group, agreed with Leahy that globalisation is “an opportunity for retailers and suppliers”, and would give “more choice and even better value for consumers”.
Finally, Visa UK president and chief executive Peter Ayliffe discussed how the information revolution is transforming consumer behaviour giving them greater opportunities to make informed choices.