By Cathy Rose A. Garcia
Korea's retail sales are expected to grow at a moderate 2 percent through 2014, according to a report by PriceWaterhouse Coopers (PwC).
The report ``Strong & Steady: 2011 Outlook for the Retail and Consumer Products Sector in Asia'' showed that sales growth in South Korea was seen as weak in 2010, reaching less than one percentage point.
This year is expected to be better with growth averaging 2 percent through 2014.
``Nonetheless, Korea is home to one of Asia's most dynamic and largest retail markets, ranking fourth in U.S. dollar terms behind Japan, China and India, and a relatively wealthy population," the report said. The report was based on a study conducted by PwC and the Economist Intelligence Unit.
Korea's retail market is also seen as shifting from small outlets to hypermarkets, which are now a one-stop shop for consumers. Currently, 70 percent of the sector is made up of small outlets.
Online retailing has always done well in Korea, with more online shops and product diversity. ``Korea has the highest internet penetration rate in the world and a dynamic communication services industry, which accounts for its status as one of Asia's fastest growing online retail markets,” the report said.
``The challenges of operating in Asia are great, but the opportunities outweigh the challenges. Demand is growing across the board and this will be encouraged not just by rising incomes but also rising access to technology,'' said Carrie Yu, China and Asia-Pacific retail and consumer leader at PwC, in the report.
Overall, the outlook for Asian retail sales is positive, with average growth of about 6 percent for 2011 ― 2 or 3 percentage points higher than the global average. Total retail sales are expected to hit more than $8.5 trillion by 2014.
China will set the pace for the region, with 14.6 percent growth for 2011 and 12.4 percent in 2012. This is a far cry from Korea’s 2 percent growth forecast for 2011 and 2.4 percent in 2012.
In Asia, there are several trends to watch out for, such as the consolidation of operations for some multinational retailers; and the growing demand for fast fashion and online retailing.
Major retailers Carrefour and Wal-Mart are expanding in China. Korean retailer Lotte Shopping is also expanding in other countries, buying Makro chains in China in 2007 and Indonesia in 2008. It bought a stake in Chinese supermarket and hypermarket chain Times in 2009.
Lotte is also planning on making a bid to buy the hypermarket business of Indonesia’s Matahari Putra Pirma PT, which the group hopes to get for $1 billion.
The demand for fashion and apparel in Asia is expected to continue to grow in 2011, with average annual demand growth of about 5 percent through 2014.
Department store retailer Lotte is planning to enter the Chinese market with a wholly owned store in Tianjin in 2011 and expects to have 20 department stores in China by 2018.
2010 also marked a strong rebound for luxury sales in Asia, and prospects are good for 2011. China will be the most important market in Asia and around the world for luxury goods. The China Association of Branding Strategy estimating 250 million in China can now afford to buy luxury goods.
``The opportunities are enormous, but as in other sectors, the challenges can be considerable. Shiny new shopping malls notwithstanding, at present, there is a dearth of high-end retail space, few well-trained sales staff and rising competition,’’ the PwC report said.
The online retail market in China is on the brink of exploding, with 60 percent growth in internet sales in just the first half of 2010. A few Asia companies like China's Taobao and Japan's Rakuten have found success in the market. Korean online retailers, who have enjoyed success at home, have yet to make any inroads in China.
Fast-moving consumer goods firms will be facing challenges, especially with the rise of private label goods. "As they expand into less developed areas, they will run into inadequate infrastructure and distribution networks, and in some cases, high levels of market competition. In addition, less expensive private-label goods
Korean hypermarkets have private label brands, Lotte Mart's WiseSelect and Shinsegae E-Mart's Fresh and Best, which offer good quality products at competitive prices
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