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Rio de Janeiro, modern retail is also spreading in Brazil’s north and northeast, and to larger interior cities. Many international funds are showing confidence in the


market. J.P. Morgan Asset Management invested more than $45 million in online fashion retailer Dafiti, and The Carlyle Group acquired an 85% stake in toy store chain Ri Happy, which will add 20 new stores to an existing 110 by the end of 2014.5 Brazil’s leading retailers are adding sales area. Major players such as Wal-Mart, department store Riachuelo, apparel retailers Hering and Lojas Renner, and supermarkets Pão de Açúcar and Polishop are investing billions to open new stores, expand current ones, and improve technology. Drugstore RaiaDrogasil, fresh off the 2011 merger of Droga Raia and Drogasil, announced the acquisition of five of Drogaria’s six stores in Brazil, leading an expansion into Brazil’s northeast. Chilean retailer Falabella recently acquired a controlling stake in Brazilian DIY chain Dicico, which operates 58 stores in the state of São Paulo, in a deal worth almost $200 million. Luxury malls, such as JK Iguatemi in São Paulo and


Village Mall in Rio de Janeiro, have served as the platform for the launch of several international luxury brands, including Valentino, Miuccia Prada, Miu Miu, Goyard, Sephora, Gucci, Lanvin, Van Cleef & Arpels, Bare Minerals, Topshop, Dolce & Gabbana, and Nicole Miller. Gucci opened its first men-focused store, while Mont Blanc is opening its 10th store, and Tiffany & Co. will open its fifth in Curitiba later this year. Sephora opened at JK Iguatemi in June and plans to


open four more stores in São Paulo and Rio de Janeiro. Zara has plans to open its first Zara Home in South America at JK Iguatemi. The FIFA World Cup in 2014 and the Olympic Games in


2016 are drawing important investments in travel retail. Brasília International Airport plans to add more than 50 retail stores, and Dufry, the country’s duty-free leader, will add retail space at São Paulo’s Guarulhos International Airport and begin operating in Campinas’s newly privatized Viracopos International Airport.


Asia Six Asian countries rank in the GRDI. Asia has felt the


effects of the global economic slowdown, but consumer spending growth, continued adoption of modern retail, and


solid economic fundamentals keep Asian markets attractive to global retailers. China slips one spot to fourth in the rankings, but it


remains a retail powerhouse, both in bricks-and-mortar stores and online, as consumers outside of major cities flock to modern retail formats. Other promising markets in Asia include smaller gems such as Mongolia and Sri Lanka and large markets such as India, Malaysia and Indonesia. China: A global retail leader. China’s retail market


remains irresistible to global retailers of every stripe. With double-digit sales growth and rising consumer demand (albeit somewhat more slowly), China remains a dynamic retail environment. Small- and medium-sized stores are gaining popularity


due to their lower-priced offerings and formats that cater to Chinese shopping habits. PARKnSHOP, a leading Hong Kong grocer, plans to open 300 mid-sized supermarkets in South China over the next few years. In 2009, Wal-Mart began operating convenience stores, the focus of its long- term China strategy. Still, the hypermarket format has room for growth. For example, Sun Art Retail Group, which operates Auchan and RT-Mart stores in China, had 14.3% revenue growth in 2012 as it expanded rapidly with 43 new stores. Shopping centers are growing more popular as they


blend more shopping and entertainment alternatives into the mix.6 The luxury segment has suffered recently as consumers


purchase more goods abroad and amid tighter regulations on gifting to government officials. Major luxury brands are rethinking their expansion plans in China. For example, Gucci reduced its Chinese expansion plans to three or four new stores per year (rather than 10 to 15) and will now focus more on same-store sales growth. Still, Chinese consumers are hungry for luxury goods, and demand is expected to recover eventually. E-commerce now represents as much as 10% of retail


revenues in some categories. Total online sales reached over $200 billion in 2012, and continued growth is expected.7 Online players are using heavy promotions to grab share from bricks-and-mortar stores. For example, on Singles Day, a Chinese equivalent of Cyber Monday in the United States, online sales surpassed $3 billion. Another encouraging sign: Alibaba, the leading business-


5 All monetary values are in U.S. dollars unless otherwise noted. 6 With the wide popularity of malls in China has come a wide range of estimates of the industry’s size there. Linkshop, a Chinese Website focused


on the retail industry, estimates that there are now 3,100 “malls” in China, with 288 added in 2012, primarily in Tier 2 and 3 cities. On the other hand, ICSC’s Country Fact Sheet, as of year-end 2011, indicated that there were 3,795 centers of all sizes in China, with only 973 being in the two


largest size groups: more than 100,000 square meters (sq m) and 50,001-100,000 sq m. 7 Estimates have ranged from $207 billion for the year to one by the Internet Society of China of $210.4 billion (see Kenneth Rapoza, “China E-Commerce Rises 64.7% In 2012,” Forbes, March 29, 2013, retrieved July 16, 2013).


INTERNATIONAL COUNCIL OF SHOPPING CENTERS 16 3 RETAIL PROPERTY INSIGHTS VOL. 20, NO. 2, 2013


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