The IGD explores the directions retailers with global ambitions (and those without) must go to compete in a shrinking world Our world is shrinking and the retail world is no exception. The top 200 grocery retailers control about 31% of worldwide retail sales, with the top 25 controlling about 16%. However, by 2009 it is estimated that those 25 chains will control a staggering 40% of the worldwide retail market. The IGD estimates the global retail market is worth $2.8 trillion with 70% of the market concentrated in 10 countries ­ the US being the biggest (18%), followed by Japan (15%) and China (8%). It says global retailers are increasingly competing against each other in the same markets, improving their competitive ability and exporting this back to domestic markets. And in its report, Global Retailing The Future, the IGD asserts that retailers which remain domestic are in danger of looking increasingly parochial against these global players. It says the winners will be those which consistently excel in key areas: global strategy, in store execution, customer knowledge, back office operations, financial resources and flexibility in acquistions. Poland, Brazil and Thailand are considered to be the current "key battlefields" while candidates in the next three years include Chile, developing Asia (in particular Indonesia, Vietnam and the Philippines) and Central/Eastern Europe surrounding Poland. In the medium term ­ three to five years ­ China and South Africa have potential, while beyond 10 years, India and west Africa represent potential battlefields. The priority for the years leading up to 2009 is for the leading retailers to develop a pan-region presence in the three key areas, NAFTA (North American Free Trade Association), Europe and Far East Asia. They also need to start building presence in global growth regions such as Eastern Europe, South America and Far East Asia, excluding Japan. The IGD says global retailers take four different strategic routes to build operations: the organic route in mature markets (the safest strategy but hard to implement; organic growth in emerging markets (used successfully by Tesco in Eastern Europe); growth through acquisition in mature markets (the most efficient strategy to rapidly secure market share ­ as shown by Ahold); and growth through acquisitions in emerging markets (the highest level of risk but with potential to lead to high returns.) And as a result, in the standard success league ­ global retailers ranked by turnover ­ Wal-Mart is in the lead, followed by Carrefour, Metro, Kroger and Albertson's. But the IGD has devised an alternative global retail index which includes other factors in determining position, such as turnover, presence in key regions and home market dominance. Its rating aims to reflect a retailer's international management skills. The leading global retailers according to the IGD index, Carrefour, Ahold and Wal-Mart, clearly stand out. Their strategy is focused on globalisation and their resources and infrastructure are organised consequently. It says that although Wal-Mart is by far the largest retailer in terms of size, it is not yet as "global" as Carrefour or Ahold which have a wider geographical presence and have operated internationally longer than Wal-Mart. The IGD puts Carrefour on top with a global index of 83%, followed by Ahold (78%), Wal-Mart (72%), Metro (60%) and Ito Yokado (55%). Being a global retailer is not only about size and cross border activity but also about retailing skills, vision and management. In the future it predicts that: - Carrefour is likely to be one of the very few global retailers present in all of the major regions. - Ahold's short term moves are to increase its strength in Europe, NAFTA and South America, with foodservice and e-commerce initiatives likely. - Wal-Mart is likely to continue to dominate in NAFTA with further organic growth; Western Europe and Far East Asia will occupy Wal-Mart's efforts in the short term. It is likely that the chain will move into Japan. - Metro looks set to become one of the most global retailers through its cash and carry operation. - Ito-Yokado has plans to consolidate its leading position in Japan as well as to increase its presence in China. It is also expected to have built strong positions in NAFTA and Far East Asia. - Delhaize plans to focus short term on consolidating its position in North America, but to establish its position as a global retailer it needs further scale particularly in Western Europe and throughout Asia. - Tesco needs to address the issue of Western Europe outside the UK/Ireland as well as NAFTA and Japan if it wants to establish itself as a global retailer. In these new battlefields, global retailers will increasingly compete against each other, which the IGD says will lead to a super league of retailers and an increasing spread of global best practices among the members of this elite group. For retailers which don't pursue a global strategy, the disadvantages include: reduced long term growth potential, increased threat of acquisition, lack of scale, less access by international sourcing and lower rating by markets/ investors. Advantages include: no exposure to risks of foreign markets, increased ability to remain focused and to react more quickly in one market. Retailers which are not global will thrive in domestic markets, but to do so will have to align themselves with one of the sectors within the new grocery structure now emerging that does not rely on being global, including becoming neighbourhood retailers, launching meal solution centres and maybe remote shopping. It's make your mind up time... Top 10 retailers by turnover turnover $bn Wal-Mart 156.3 Carrefour 55.3 Metro 46.6 Kroger 45.4 Albertson's 37.5 Rewe 36.6 Ahold 35.8 ITM 35.2 Target 33.2 Edeka 31.8 IGD Global Retail Index global index (%) Carrefour 83 Ahold 78 Wal-Mart 72 Metro 60 Ito Yokado 55 Delhaize 54 Tesco 54 Casino 49 Auchan 48 Aldi 47 {{FEATURES }}