Taiwan is the least difficult market in Asia Pacific for companies to execute a large-scale retail expansion program.
That’s according to rankings just released by global built asset consultancy EC Harris.
Within Asia Pacific, Taiwan, Japan and Australia fared best in the rankings largely due to a better business environment, which includes higher allowance of foreign ownership; more business, labour and trade freedom and less corruption.
These three markets also ranked highest in terms of the quality of infrastructure they provide to facilitate business, including roads and the supply of electricity.
For international retail expansion, foreign businesses might intuitively aim for markets like China, India and Indonesia – three of the world’s most populous countries – but EC Harris’ report reveals that these markets are in the bottom half when it comes to ease of rolling out new stores.
Meanwhile, the Philippines, Vietnam and India fared the worst among Asian countries. These markets scored low for having difficult business environments in general and poor infrastructure.
India, for example, ranks last out of the 40 markets when it comes to the retail business environment, due to corruption, freedom of trade and ease of business.
Globally, whilst many of the top-ranking countries are those with established markets, strong infrastructure and a well-developed consumer base, those that rank lower include developing BRIC nations where the likelihood of risk and reputational damage to a retailer is far greater.
Despite China’s emergence as one of the world’s largest consumer markets, the country remains around the midpoint of the global Index, ranked 23rd, and is only 8th out of 12 in Asia Pacific.
“China, India and Indonesia are more difficult for retailers to expand into than Western markets due to a restricted supply chain and low project delivery capability. This creates far greater risk and potential reputational damage for retailers. But despite these challenges, the number of international retailers expanding into emerging markets continues to grow,” says Jonathan Moore, head of property, Asia, at EC Harris.
“Western brands looking to secure new revenue to underpin lower return in home economies and drive brand loyalty in new markets are increasingly looking to implement expansion programs in countries such as China. This is to take advantage of its rapidly growing consumer market. Success in this kind of market relies on a high quality store end-product and pace of delivery. Retailers must assess and retain the best program capabilities in order to mitigate risk and reputational damage.”
EC Harris also says that with renewed focus on compliance, ethics and business governance arising from the Bangladesh factory incident in April, retailers are also increasingly putting proactive measures in place to protect the brand from direct and indirect damage and to minimize reputational risks.
The likelihood of risk and reputational damage to a retailer is much greater in emerging and developing markets and the report highlights the need to maintain brand protection whilst retaining quality and speed when entering new markets.
“No matter where retailers are looking to expand, property development programs must be streamlined to ensure efficiency. In today’s volatile market, the competitive advantage will come to those retailers who implement practical solutions throughout the supply chain to expand faster and save money, whilst protecting the brand,” Moore said.
The ranking for Asia Pacific markets
5. South Korea
7. Sri Lanka
14. South Korea
19. Sri Lanka
Credit: Inside Retail Asia