Huge amounts of merger and acquisition activity is inevitable in the emerging retail markets of India and China as local entrepreneurs and multinationals battle it out for position, William Fung – group managing director of super supplier Li & Fung – told the World Retail Congress.
Fung runs a manufacturing and logistics business with a turnover of US$12 bn (£6bn) a year out of 40 countries, and has a private retail empire with a US$1bn (£505m) turnover in the Greater Chinese market. He said that in Russia, India and China retailers were in an era similar to the Californian land grab, with people buying up the rights to retail space.
He said: "Today’s landscape is revolving less around operating excellence and more about market share. M&A activity is, and will be, big news among all entrepreneurs in Russia, India and China, with global companies often choosing to buy out local players instead of competing against them.”
Fung said India still presented great opportunities because of its fragmented retail landscape, while China seemed more mature in its retail development. He pointed out that the top 100 retailers, which control 70,000 doors, still only represents 10% of total retail on the continent.
He explained that the pace at which infrastructure is put in place is directly influenced by government investment and affects the rate of retail expansion. The Chinese government's strategy to link the five main economic zones via a new road network has enabled Fung to expand his privately owned menswear chain at a rate of 100 stores in China last year. He added that it will also open two stores a week this year.
Fung said the expertise that emerging markets lacked was organised supply chains and management expertise, which meant that Russian and Chinese consumers were happy to place their trust in western organisations because they had a proven track record that would deliver.
He added:”Customers in these countries are just discovering the mysteries of branding and there is an opportunity for new brands to develop deep consumer loyalty.”