Long-Term Trends Favor Asian Retail Growth

Asia's Retail Revolution

(Continued from Prior Part)

However, there are a lot of people in Asia who are getting richer. Many have a disposable income for the first time in their lives and want to spend this money. The most successful companies have already figured out a way to tap into these fundamental changes.

While Asia must overcome many immediate challenges, we believe an investor would do well to remember the longer term trends that are changing the lives of billions of people across the region every day. That’s because these changes could end up making someone some decent money.

Market Realist – Long-term trends favor the Asian retail sector. The factors favoring growth in the Asian retail sector are as follows.

• According to estimates by the Economist Intelligence Unit, Asia had only 80 million square meters of modern retail space in 2013, but this figure is expected to rise to 135 million square meters in 2018.

• Most emerging markets (FEO)(VWO) in Asia have young populations, which is contributing to the region’s growth story.

• Rising incomes and increasing population are also drivers for retail growth in the region. According to estimates by the Economist Intelligence Unit and the World Bank, Asia (FAX) made up 26.8% of the world’s output in 2001. In 2013, this estimate has risen to as high as 36.6%.

• The pace of urbanization is increasing slowly but steadily in the region, giving rise to a new middle class, which is bolstering the retail sector. As per forecasts by the World Bank, Asia’s share (GRR) in the global middle class is expected to rise to 54% in 2020 from 28% in 2009.

• The above graph shows how e-commerce is estimated to play a larger role in retail trade in the times to come. With 42% of the world’s Internet users living in the area, and this figure only set to rise further, Asia is a potentially attractive market for e-commerce.

• China (GCH) is currently the world’s top e-commerce retail market. According to Pricewaterhouse Coopers, at an average rate of 8.5%, the pace of sales growth in Asia should be the fastest in the world in the next five years. PWC forecasts that Asian retail sales will grow to $10 trillion by 2018—almost twice that of North America. It also forecasts that China will overtake the United States to become the largest retail market in the world by 2018. India (IFN)(PIN) is also likely to exhibit robust GDP growth of ~8% over the next few years, also making it an attractive retail market.

Both demographics and growth trends support the case for an Asian retail growth story to come.

Browse this series on Market Realist:

• Part 1 - China’s Meteoric Rise as the Global Retail Hub

• Part 2 - Indian Retail Sector Experiences a Renewed Boom

• Part 3 - Understanding the Phenomenal Growth of ASEAN Nations