Report calls Vietnam best emerging market for retailers

By Martinne Geller

NEW YORK, June 2 (Reuters) - The most attractive region for retailers looking to open stores abroad is the Middle East and North Africa, according to a study released on Monday, but the single hottest market at the moment is Vietnam.

The weak U.S. economy and soaring gasoline costs, which gobble savings made from manufacturing in China, are bringing international expansion to the forefront of retailers' minds, according to Mike Moriarty, head of the retail and consumer industries practice at A.T. Kearney, a management consulting firm.

"As growth in the U.S. slows it stresses the importance for every retailer to have a global strategy," Moriarty said.

Vietnam dethroned India, which had the top spot three years straight on A.T. Kearney's Global Retail Development Index, which ranks countries based on a variety of factors such as economic and political risk, per capita income, market saturation and market attractiveness.

Moriarty said Vietnam's retail market is still small, but that the absence of competition and 8 percent gross domestic product growth make it attractive. Plus, Vietnamese consumers are among the youngest in Asia and are rapidly increasing their spending and moving to large cities, he said.

Germany's Metro AG (MEOG.DE), French supermarket group Casino (CASP.PA) and Chinese department store operator Parkson Retail Group Ltd (3368.HK) already have stores in Vietnam. Canada's Alimentation Couche-Tard Inc (ATDb.TO) announced a deal in May to open Circle K convenience stores there as well.

"The small-format convenience store will be a great way to get started in Vietnam so we would anticipate that it's probably on 7-Eleven's list as well," Moriarty said.

The 7-Eleven website lists 16 countries with 7-Eleven stores, but Vietnam was not one of them. An official from the parent company, Japan's Seven & I Holdings Co Ltd (3382.T), could not immediately be reached to ask if it was on the group's radar screen.

Moriarty pegged the value of the Vietnamese retail market at about $20 billion. But a January report in a state-run newspaper quoted plans from the Vietnamese government to see retail sales grow 20.5 percent this year to 975 trillion dong ($54.3 billion).

After Vietnam on A.T. Kearney's index come the often-cited India, Russia and China, followed by Egypt, Morocco and Saudi Arabia. Turkey, Algeria, Tunisia and United Arab Emirates are also in the index's top 20.

The primary reasons the Middle East and North Africa have so much potential are the strong euro, which has been supporting investment there, consumer familiarity with modern retail concepts and wealth from oil, Moriarty said.

Apparel retailers in particular should look to Brazil, Moriarty said, since its people import a lot of clothing, spend a lot on clothing and often prefer up-to-date fashions.

Aside from being sources of revenue amid a North American slowdown, stores in emerging markets like China, Vietnam and the Middle East can be more profitable since the geographic distance between factory and store is shorter. That is key with fuel costs climbing.

"If you can find consumers to match up with your already well-developed supplier base, and they're thousands of miles closer, so much the better," said Moriarty.

"So smart retailers will start stitching again in South Carolina but they'll also be opening stores in Shenyang." (Editing by Phil Berlowitz)