Gustavo Ballvé on June 12th, 2011
Food for thought, Home, Industries, Investment Themes, Mental models, Portfolio Management, Retailing, Risk management

Our headline is misleading in purpose – the idea is to provoke the reader to ask questions. The headline from AT Kearney’s own press release“Brazil Jumps to First Place in Ranking of Top Developing Economies for Global Retail Expansion” – is an improvement, but not yet completely self-contained. The devil is in the details, but regardless of one’s opinion about the report’s conclusion, it’s definitely an interesting read. It’s not an “investment case” for retail – and if it was, we wouldn’t publish it here, since we don’t even publish our own. It’s a great opportunity to remind our readers of a document we wrote over 2 years ago: Buysiders is meant to provide a glimpse into what we’re reading, thinking about and processing in our search for building blocks and useful mental models.

Background: AT Kearney has published the 10th annual edition of its Global Retail Development Index (GRDI), which ranks emerging markets in terms of, roughly, attractiveness to retail expansion investments. Brazil jumped to first place from 5th last year, and numbers 2 and 3 are Uruguay and Chile, respectively. Last years numbers 1-3 were China, Kuwait and India. Pretty interesting moves. So what is this index trying to measure?

From their own website: “Published since 2002, the GRDI helps retailers prioritize their global development strategies by ranking the retail expansion attractiveness of emerging countries based on a set of 25 variables including economic and political risk, retail market attractiveness, retail saturation levels, and modern retailing sales area and sales growth. The GRDI focuses on opportunities for mass merchant and food retailers, which are typically the bellwether for modern retailing concepts in a country.”

So what variables could have changed so drastically in one year especially in a relative basis? The variables listed, while just a sample of the 25 they analyze, don’t seem to warrant so much variation YoY from 2010 to 2011. We’d speculate that recent success/ growth plays a big role, and Latin America (Brazil more specifically) fits the bill.

The exercise in skepticism has its own dangers, but healthy skepticism is almost a required trait in our business. Before a story like “Brazil #1in AT Kearney report” in a financial blog can ever become even a building block in your own research, there are many questions to answer.

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