2009 | ON ONE'S OWN | |||
India | 01 | 68 | 02 | +1 |
China | 03 | 56 | 04 | +1 |
United Arab Emirates | 04 | 56 | 20 | +16 |
Saudi Arabia | 05 | 56 | 07 | +2 |
Vietnam | 06 | 55 | 01 | -5 |
Malaysia | 10 | 51 | 13 | +3 |
Indonesia | 22 | 46 | 15 | -7 |
Philippines | 25 | 41 | 26 | +1 |
Thailand | 26 | 40 | 24 | -2 |
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Table II.2 : Asian countries ranked among the 30 most attractive retail markets in the world
Source: AT Kearney2009, p.5
1.2 The world's most populous continent, young population and increasing purchasing power
Although Asia's area accounts for less than 30% of the continent's area, its population currently accounts for 60% of the world's population and is still the continent with the highest annual population growth rate in the world.
Besides China, Southeast Asia is the region with the highest population growth rate in the continent and in the world. In the past 5 years (2004-2009), this rate was about 1.2%/year and is forecasted to only slow down in the next 15 to 20 years (about 0.7%/year in the range of 2025-2050).
The Middle East region (United Arab Emirates and Saudi Arabia) has a relatively smaller population size compared to the Southeast Asian region, but 80% of the population is urban, and the proportion of young people under 25 years old is also quite high, accounting for 60% of the population (AT Kearney 2009, p.11) .
This is also a region with a young population and strong consumer demand in recent years. Domestic demand in Asia has helped the continent's economy cope with the global financial crisis in 2008 and ensured that economic growth in the region remains high. Most Asian economies are still in transition and a large proportion of these countries are gradually adjusting their economic development policies to focus on exploiting and promoting domestic consumption needs of the people. Asian society is currently seeing a large number of people with the need and ability to pay for shopping and consuming luxury goods and global fashion brands even during the crisis. Therefore, the luxury goods market in the coming time is promised to witness a strong boom, a land full of potential for the world's leading fashion and consumer goods brands.
1.3 Governments of Asian countries are gradually adjusting trade policies towards fully opening up the retail market.
The financial and monetary crisis that broke out in Thailand in 1997 and affected most other Asian countries made the governments of these countries think about closing their markets to limit exposure to globalization. However, this notion was quickly eliminated when they gradually realized that the crisis had a negative impact on the economy due to the country's unreasonable and ineffective economic structure. At the same time, the great benefits that globalization brings are undeniable. Therefore, after the financial crisis, Asian countries pursued policies of deep integration and opened most of their markets, especially the retail market.
In the Asian region, East Asia is the most developed and dynamic region, including 10 ASEAN countries, Japan, Korea, China and Taiwan. Specifically, in some markets as follows: Indonesia increased the foreign investment capital in the retail sector from 49% to 100%. In Korea, the minimum capital ratio that foreign retailers can invest from 15-20% has now increased to 100%. In addition, this country also amended the Foreign Direct Investment Law to remove all restrictions on foreign ownership in the land and real estate sectors. Malaysia has now fully opened its retail market (World Bank 2000, pp. 146-149). After 3 years of joining the WTO, China has fully implemented its commitment to open the retail market since December 2004, allowing foreign retail companies to enter the domestic market. In addition, the country is also gradually relaxing regulations requiring foreign retailers to obtain permission from the central government before opening retail stores in the country (Business in Asia 2005).
In South Asia, India has emerged as the most attractive market. The Indian market was ranked first among the world’s most attractive retail markets in 2009 (AT Kearney 2009, p.5). The country has allowed investors to open 100% direct-owned “cash and carry” wholesale establishments.
2. Future development trends in the Asian retail market
2.1 E-commerce will grow stronger and stronger
According to the Internet World Stats, the number of daily Internet users in Asia as of the end of the second quarter of 2009 accounted for nearly 43% of the total number of Internet users worldwide. Accordingly, Asia has more than 738.2 million Internet users. From 2002 to 2009, this number increased by 545.9%, the fastest growth rate in the world (Internet World Stats 2009). In particular, the number of Internet users is not only concentrated in urban areas and large cities but is increasingly expanding to
rural areas. Internet is predicted to become increasingly popular in Asian societies.
Faced with such a promising opportunity for a modern retail channel with such outstanding advantages, Asian retailers have not yet fully exploited it. E-commerce currently only accounts for a modest portion of the operations of retail businesses from Asia. According to the 2009 global retail report released by Deloitte, retail revenue from e-commerce only accounts for about 0.6% of total retail revenue in the Asian region (Deloitte 2010, p.31) . Therefore, certainly in the coming time, retail businesses in the market will invest more in deploying this potential sales channel because this is a business method that brings many benefits to Asian retail businesses:
Firstly, in the situation where rental prices in the most dynamic economies in Asia such as China, Singapore, Taiwan, Vietnam, etc. are constantly increasing and supply is limited, selling online helps retail businesses not to pay much attention to renting space to display goods. Store rental costs can be significantly saved.
Second, e-commerce allows retailers to reach a much larger customer base. The area of operation can be expanded, not just limited to a certain area like direct sales through stores and shopping malls. Retailers who choose to add this sales channel can even reach markets outside their own country at the lowest cost. In addition, the operating hours when selling online will also be much more flexible, allowing businesses to operate up to 24 hours a day.
Third, e-commerce helps small retailers to be more on par with large businesses because the size of the business is not the most decisive factor for the success of e-commerce retailers. E-commerce will be one of the top choices.
The rise of emerging Asian retail businesses in competition with Western retail giants such as Carrefour and Wal-mart.
One obvious benefit that online retailing can bring is that it helps businesses easily conduct research on customer behavior, understand the market and factors that directly and indirectly affect the business results of the business.
Meanwhile, consumers also gain many benefits when shopping through these e-stores. Asian people today, especially people in newly developed or developing industrial countries, tend to save maximum time shopping and choosing their goods. E-commerce provides them with the most optimal options in the shortest time.
2.2 Franchising in the retail market will become increasingly popular
2.2.1 Concept of franchising
Franchising (English term: franchising) has a history in the United States. This is a business idea carried out between two parties: the franchisor and the franchisee. The franchisor can be an organization: a company that produces goods or services. The franchisee is usually an individual or can also meet a number of independent business organizations. The franchise contract is established on the basis that the franchisee must pay two types of fees to the franchisor: brand royalties and fees to conduct business activities with the name and technology of the franchisor (usually calculated on monthly or annual sales). At the same time, the franchisee must also commit to the franchisor to organize the business according to the standards and procedures prescribed by the franchisor.
2.2.2 Franchising activities in the Asian retail market
Franchising has been quite strong in the Asian retail market in recent times, especially the franchising of convenience stores. 7-Eleven, the world's largest retail convenience store chain headquartered in Dallas, USA, is the brand with the most successful franchising activities in Asia to date. 7-Eleven has successfully transferred nearly 30,000 convenience stores in 14 countries, including major Asian markets such as Japan, Hong Kong, Taiwan, Malaysia and Thailand. 7-Eleven is currently implementing two franchising models in the Asian market: the traditional franchising model for individuals or companies starting operations and the business model conversion program for individuals and existing businesses (7-Eleven 2010). Dairy Farm, one of the most successful Asian retailers, is also stepping up its franchising activities in emerging Asian markets. This is the first and only enterprise in Asia to franchise stores specializing in dairy products.
In the coming time, franchising activities will continue to develop in the Asian retail market, especially franchising retail models through convenience stores due to the characteristics of this market.
Firstly, foreign retail corporations that want to enter Asia but do not have enough capacity to research or do not really understand this market can develop a network without having to directly operate the stores. Franchising allows them to join hands with businesses/individuals in Asia. The franchisee often has a certain understanding of the domestic market, easily finding stable sources of supply at reasonable prices. Therefore, the franchisee will help promote the transferred brand.
Second, for Asian retailers, franchising is quite suitable for small and medium-sized enterprises or individuals. Due to the nature of franchising, the cost is not as high as building a brand and a completely new store, so franchising becomes more attractive. In addition, operating under franchise contracts from large, reputable retailers, franchisees gain a lot of experience in managing and organizing chain stores. Normally, the franchisee will be supported by the franchisor in the process of building, designing the booth or choosing the product list, and even training employees. This is very important for new organizations that lack business experience.
2.3 M&A trend is increasing day by day
2.3.1 Concept of M&A in the retail market
- Acquisition : is when a financially strong retail business buys or takes over another business. In this case, no new legal entity is created and usually the acquired business will no longer exist on a legal basis.
- Merger : is when two or more retail businesses combine together. In this case, a new legal entity will be created and put into operation. This new legal entity will have a greater value than each business operating separately.
2.3.2 M&A trends in the Asian retail market
The current M&A trend in the Asian retail market is most active, focusing on the following types of businesses:
- Businesses that own shopping malls or discount stores: one of the largest M&A deals that took place in 2008-2009 was the Japanese real estate company Simplex's acquisition of the Mitsukoshi-Ikebukuro shopping mall chain for $705 million (KPMG 2009, p.6).
- Online or catalog businesses: the largest M&A in this sector occurred when Ebay acquired the Korean online business company GMarket Inc for 1.2 billion USD (KPMG 2009, p.6).
In 2008-2009, the number of M&A deals in the Asian retail sector decreased in both quantity and value due to the impact of the global economic downturn. However, according to the assessment of many leading auditing and consulting organizations in the M&A sector, after the first quarter of 2010, the Asian retail market will witness the number of M&A deals increase again. KPMG has made forecasts on the M&A situation in the global retail sector, in which Asia holds the position of the number 2 target market in the world, ranked above the American market.
34.1
47.1
Central Asia/Asia-Pacific
America
Europe and Middle East
18.8
Chart II.4 : Value of M&A contracts by region (6/2008-6/2009)
Source: KPMG 2009, p.6
The cause of this situation lies in two main reasons:
Firstly, the 2008 financial and economic crisis has caused many Asian businesses to face economic problems and the value of their companies has continuously decreased. This will create conditions for many retailers from developed countries or