Latin America: The China of 2020 and the Next Destination for International Retailers
By George L. San Jose, President and Chief Creative Officer of The San Jose Group
What is it about China that grabs the attention of international retailers? Is it the rapid economic growth? Or the incomprehensible size of the population? Maybe it’s because 20 years ago you could roll a basketball through Shanghai and not touch a thing; now skyscrapers are sprouting out of ground like it’s going through puberty. No matter how you look at it, China is on the economic pedestal of the planet…for now. In a constantly changing world, there’s another international market for retailers that’s on the rise, and it’s about to get the attention it fully deserves. Direct your attention to Latin America–the market that’s about to give China a run for its money. Literally.
The success of international retailers in Latin America shouldn’t come as a surprise. The Global Retail Development Index ranked Brazil, Chile and Uruguay with the top three scores worldwide in 2013. Latin American counties happen to hold seven of the top 22 positions as well. Plain and simple, Latin America is proving an area that couldn’t be a more lucrative for marketers to invest in. It may have been flying under the radar, but with fast expansion and surprisingly low risk, Latin America should already be drawing your attention.
So how did Latin America become such an attractive market? You can attribute much of the success to the rising middle class, which has grown to over 51% in 2011 from 41% in 2001 with no signs of stopping. The majority middle class has fueled a rise in per capita income and strength in the working force. As of 2010, the Latin American working class expanded to 280 million. Even better, the improved work force also includes a rise in female participation from 32% in 1990 to 53% in 2008. With Latin American women having increased financial independence and decision-making ability, consumer buying is growing. Retailers know a strong middle class means strong buying power, and that’s good news for investors.
No one understands this more than the largest retailer in the world: Wal-Mart. Its presence in Latin America is unlike anywhere else outside the U.S. Currently, Wal-Mart has set up shop in Argentina, Brazil, Costa Rica, El Salvador, Guatemala, Honduras, Mexico, Nicaragua, Peru and Puerto Rico. Can you blame them? With GDP growth, increasingly better incomes, and a broadened middle class, breaking ground in Latin America has never been so lucrative.
In the meantime, China is enjoying the benefits of being in the international spotlight. It’s hard to discuss global business without mentioning this country. But as we near closer to 2020, keep in mind that while China may be a larger market, it doesn’t have the growing potential of Latin America. The region is getting warmed up for a bright future for international retailers. Don’t be surprised when it steps into the spotlight.