Have you begun vetting the VIM nations?
While Vietnam, Indonesia and Mexico have been somewhat obscured by the shadow cast by the BRIC (Brazil, Russia, India and China) nations, all offer varied and undeniable opportunities for retailers pursuing global expansion.

Boris Planer, research director for macroeconomics at Planet Retail, insists that despite difficulties in the global economy, there continue to be several trends and developments that point to growth prospects and provide reasons for retailers to invest in the VIM markets.

These include growing populations that combine a soaring life expectancy with accelerated urbanization; the existence of significant and growing urban upper and middle classes; continued industrialization, technological progress, and therefore, wealth; and changing lifestyles that bring with them a greater openness to Western brand and consumption habits.

Planer, who recently authored a report entitled “Emerging Markets 2009,” says expanding into emerging markets “requires deep pockets and a commitment to endure fragile economic environments and strong domestic competition,” but those companies that begin building loyalty with local consumers today will benefit substantially in the years to come.

Other global experts share similar viewpoints. Ira Kalish, director of consumer business for Deloitte Research and a specialist on global economic issues, says retailers need to continue looking beyond their borders despite the ripple effects the U.S. recession has had on the global economy. “The recession is temporary, and in some parts of the world — Asia in particular — they’ve really managed to fair just fine,” he says. “Recovery will come and retailers with global ambitions will enjoy future success.”

Opening stores in international markets, particularly areas like Vietnam and Indonesia, “is not for the faint of heart,” he says. “Companies need to have plenty of capital and a bundle of patience because success doesn’t come overnight. But for those who get it right, the rewards are very sweet.”

Getting it right often means dealing with thorny obstacles ranging from much-needed upgrades to infrastructure to government red tape, corruption and crime. Ryan Parker, director of marketing for the embedded and communications group at Intel, doesn’t believe that technology should be an impediment to global expansion.

“There are hurdles to be overcome – everything from power supply to transportation — but we’ve witnessed success stories as a result of partnerships with local service providers,” Parker says. “It’s often possible to lease equipment from a service provider and they can offer assistance with distribution and logistics, even with the transfer of data.

“It’s possible, for example, to run a low-power processor on a battery,” he says, noting that Indian businesses are using car batteries to solve power problems.

Sarah Taylor, Oracle’s senior director for the retail industry, is a firm believer in the precept: “Act locally and have a humble perspective.” Each market will require certain tweaks to a retailer’s strategy, and “companies have to understand and respect the nuances of the local culture and weave changes into their businesses accordingly.”

Natives of these emerging markets “don’t see their nations as emerging, but rather as fast-growing,” Taylor says, stressing that it’s more than just a play on words. “Fast-growing is a real indicator of the state of mind of the inhabitants of these countries,” she says. “These retailers are sophisticated; they’re ready to take a spot on the world stage.”

VIETNAM
Vietnam’s economic growth, which some experts have compared with China 20 years ago, is based on one-party government, low wages that are attractive to foreign investors and high export volumes — especially for items like apparel, textiles, footwear and toys.

The global downturn is being felt there, albeit with fewer negative repercussions than elsewhere around the globe. Although real GDP growth slipped from 8.5 percent to 6.2 percent between 2007 and 2008 and is expected to decline to 4.6 percent this year, according to the IMF’s October forecast, the outlook begins to brighten in 2010.

A key reason for the bullish prognosis is Vietnam’s population. While there’s no question that an enormous income gap exists between those living in rural areas and those in emerging urban markets, the country has an enormous concentration of young people; it’s been reported that nearly half of the residents are under the age of 25.

While young people may not have the money to spend now, they’ve grown up in a more connected and global world and their desire for branded goods will need to be sated, Planer says.

“The younger generation has a different mentality about spending and acquiring branded goods,” he says. “Now’s the time for retailers to begin putting down roots; I’m convinced there will be a handsome reward for those who make an early investment.”

David Hamaty, Asia Pacific director for Kurt Salmon Associates, says Vietnam’s “growing economy and growing per capita income are definitely strengths. Immediate opportunities are probably around air conditioned mini-marts and supermarkets,” he says, noting that a shift away from mom-and-pop shops and outdoor markets is likely.

“Externally, conditions appear favorable, too, as private enterprise grows and Vietnam’s relationships with the outside world continue to improve,” he says. “Vietnam is also closely linked to China, so it should be helped by riding the China wave.”



Kalish characterizes entry into this market as “sensible” but “compared to Indonesia, Mexico and some of the other up-and-coming global markets like the Middle East, Vietnam is small. It’s also still a very poor country with an inadequate infrastructure.”

Parker acknowledges the infrastructure hurdles, but insists they can be overcome. “With the technology available today you don’t need a big footprint to be effective – just enough to set up shop and start doing business,” he says. “Remember, there are no legacy systems here; there are other challenges, for sure, but there are opportunities to partner with a service provider, for example. It lowers the level of risk and gives you a foot in the door.”

Vietnam only recently opened to Western investment. METRO Group currently operates 10 Cash & Carry stores in the country; luxury brands like Louis Vuitton, Cartier and Lacoste have entered the market, and adidas has established a presence as a sports brand. Harrod’s is rumored to be poking around, but there’s no official word yet.

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