Bloomberg has put it very clearly: “South America is the next retail frontier as Brazil, Uruguay and Chile top China and India for new expansion opportunities”.
The first question is why. South America has hardly seen any recession while in Europe we have gloomy news about our economies daily. Therefore, across Latin America, disposable income is rising and so is retail spending.
A more relevant question for British retailers is: what shall they do about it? The study from AT Kearney quoted by Bloomberg makes a case for investing in to build brand loyalty in those countries to then capture the rewards. The same study, also quoted by the FT in June, shows some exciting figures. The Global Retail development Index shows Brazil, Uruguay and Chile right at the top as “Latin American shoppers knock Asia off a global retail gauge”.
Let me give you some examples that show that some British companies are making the most of it.
Despite closing many of its UK stores, Mothercare has also opted for Latin American markets. The mega British chain will open stores in Colombia and Panama. Nature’s Purest, another British retailer, has opened four stores in Brazil.
We have discussed in this blog before about the expansion of British luxury brands in Latin America, with a good few examples being Thomas Pink, Hackett London and Burberry. It takes a few minutes of observation in most Latin American capitals to spot a few Land Rovers, too…
Other global retailers such as Carrefour, Casino and Wal-Mart have expanded in the continent. Gap has also announced a new store in Santiago (Chile) for October.
It is definitely a time for British retailers to carefully evaluate the potential for expansion into Latin America. The following questions need to be answered in each individual case:
– What markets should we target?
– Who are our main competitors already there, and who is also thinking about expanding?
– What are the main risks?
– What are the costs associated with expansion?
– How should we price our goods to penetrate these markets?
– What partnerships can we forge?
– Who do we deal with who can give us the local knowledge?
– Where do we start?
While many British retailers will go for the (vast yet unforgiving) Brazilian market, others (like Mothercare), will want to test the concepts in smaller countries such as Uruguay or Peru, particularly if it is the start of a regional expansion.
The opportunity is there, it is a matter of figuring out how to make the most of it.