Dr. Ira Kalish, Deloitte Research's director of Consumer Business, added: "As we move through 2009, consumers will be intensely value oriented, even more so than in the recent past. We are seeing this already with consumers shifting to more price focused retailers. For all retailers, this environment will require added attention to keeping costs under control."
Forty-four retailers experienced declining sales in 2007, compared with 36 the year before. Furthermore, the number of unprofitable retailers in the Top 250 doubled from seven in 2006, to 14 in fiscal 2007.
Wal-Mart Stores, Inc. remained the world's largest retailer ahead of Carrefour Group. Tesco PLC and Metro AG both climbed one place as The Home Depot, Inc. suffered its first-ever annual sales decline in 2007 and dropped two places to 5th.
Russian, Chinese and South Korean Retailers Among Fastest Growing
Two thousand Six saw the entry of two Russian and four Chinese retailers to the Top 250 list. This year, all six of these retailers have climbed significantly in the rankings. Indeed, two Chinese retailers now feature in the Top 100. Gome Home Appliance Group is ranked 63rd and is the eighth highest ranked retailer in Asia/Pacific, the first Chinese retailer to break into the regional Top 10.
Furthermore, of the 10 retailers with the highest CAGR over the past five years, two are Russian, two are Chinese and one is South Korean. Four of the six fastest growing are from emerging markets. Russian electronics retailer Euroset Group had a CAGR from 2002-2007 of 108.5 percent.
Tougher Times Ahead but Retailers Should Still Go Global for Growth
The view that the Asian economy had "decoupled" from the United States with Asian companies growing under their own steam, and not because of the United States, has been shown to be wanting following the onset of the current financial crisis. There are tougher times ahead in the emerging markets but they may not be hit as hard as developed economies.
Kalish said: "China's export growth has tapered off in real terms due to the slowing U.S. economy and the rising value of the Chinese currency. However, inflation appears to be under control allowing the easing of monetary policy. The result is likely to be slower growth but not recessionary and as consumer spending should remain stable, retailers will be in a strong position. India also faces economic slowdown, but not recession. While in the longer term, issues such as excessive regulation, poor infrastructure and limits on the supply of human capital could stifle growth, India should still grow more quickly than its historical pattern and retailers will continue to benefit."
Many retailers that have gone global to take advantage of this growth have found the terrain challenging and not as lucrative as originally anticipated. However, the reasons for going global have not disappeared; indeed, they have been reinforced by recent events. Retail spending is weak in developed countries and is likely to remain so in the near future.
Kalish said: "For the world's leading retailers, growth will come either from gaining market share at home, or moving into new markets - especially emerging markets. In the coming years, we may see second-tier retailers as well as more non-food retailers take the plunge. In addition, we are also likely to see retailers based in emerging markets continue the path of investing in other emerging markets and even in some developed markets."
