This is demonstrated in the report, which ranks the 250 largest retailers in the world by fiscal 2007 sales figures, by the strong performance of discount retailers in the Top 10. The big movers were Schwarz Unternehmens Treuhand KG (Schwarz), owner of the Lidl supermarket chain, which climbed three places from 10th to 7th. Over the past five years, Schwarz has grown at a faster rate than any of the current Top 10 with a Compound Annual Growth Rate of 12.6 percent. Aldi GmbH (Aldi) also climbed this year and was the only new entry in the Top 10 taking the place of Sears Holdings Corporation (Sears).
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.
Top 10 retailers:
Furthermore, of the ten retailers with the highest Compound Annual Growth Rate over the past five years, two are Russian, two are Chinese and one is South Korean. Indeed, four of the six fastest growing are from emerging markets. Russian electronics retailer Euroset Group had a Compound Annual Growth Rate from 2002-2007 of 108.5 percent.
Kalish said: “China’s export growth has tapered off in real terms due to the slowing US 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 recession 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 which have gone global to try and 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, strong 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.”