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Wednesday, Oct 06, 2004

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India is second most attractive retail destination: A.T. Kearney

Sindhu J. Bhattacharya
Richa Mishra

New Delhi , Oct. 5

A.T. Kearney has ranked India as the second most attractive retail destination among emerging markets globally, ahead of China, despite the ban on Foreign Direct Investment (FDI) in the sector and a relatively low market attractiveness of the country.

In its 2004 `Global Retail Development Index (top 30 Emerging Markets)' report, A.T. Kearney has ranked India 88 on a scale of 100, aggregating points earned over parameters such as economic and political risks, market attractiveness, market saturation and time pressure. Russia, with 100 points, is the most attractive emerging retail destination, according to this report.

The report said India's market size offered "tremendous promise as its population is expected to surpass China's by 2050. India's country risk score (62) is higher due to improved living standards and continuing economic growth". Even dampeners such as stringent FDI rules have failed to move India from its vantage point in the list.

"India's market attractiveness score is relatively low (34) because of its large rural population but it earns marks in other areas. Retail sales per capita have increased by one-third between 1999 and 2003," it said. Other downsides include a fragmented retail market with the top 10 companies holding only about 2 per cent of the market share.

The report said two foreign retailers - Hong Kong-based Dairy Farm and Metro AG - are in the top five; and South African retailer Shoprite is also considering a foray into the country.

Besides, a number of companies, including Wal Mart and Carrefour, have expressed interest in India if FDI regulations are eased, since at present foreign ownership of local retailers is not permitted."Until reforms pass, successful global retailers will have to adapt and enter using different formats. For example, for the past two years Planet Sports India has operated two franchise stores for Marks and Spencer," the report pointed out.

India is closely followed by China with a total score of 86. A.T. Kearney said that though China was also an attractive retail destination, economic and retail indications are showing "signs of stagnation".

In its overall assessment of the global retailing scenario, A.T. Kearney said 2004 represents a revival of mass merchants and food retailers and that this year, discounters have entered the fray "significantly changing the competitive landscape in emerging markets where consumers are more price conscious".

The annual A.T. Kearney Global Retail Development Index ranks 30 emerging countries on a 100-point scale - the higher the ranking, the more urgency to enter a country. The 30 countries were presented from a list of 185 based on criteria including a country risk score of more than 40, population of over two million and GDP per capita over $2,000.

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