Kearney’s 2023 Global Retail Development Index - Key Insights For Cambodia
Kearney's 2023 Global Retail Development Index (GRDI) assesses the retail landscape of the emerging market potential which the latest report says is at a crossroads.
The bi-yearly surmises that there has been a reshuffle of emerging market potential, and Cambodia which is ranked for the first time, reports that the country is now back on track to recover thanks mainly to "growing tourism, increasing consumer demand, a revival of the services sector, and the easing of inflation, which led to a drop in energy and food prices."
The survey underscores the agility and dynamism of retail economies and Kearney's 2023 Global Retail Development Index (GRDI) states that emerging markets in Southeast Asia, have benefited from a growing middle class, expanding infrastructure, and increasing urbanisation. These have resulted in a vibrant market for both traditional and modern retail players.
Siddharth Pathak, Asia Pacific Co-Lead, Consumer and Retail Practice, Kearney said: "This year's GRDI reflects the diverse retail potential among emerging economies in Asia. From established powerhouses like China and India to rising stars such as Indonesia and Vietnam, each nation offers distinct opportunities and challenges for retail investment in the region."
Cambodia - Kearney’s 2023 Global Retail Development Index
The report claims that Cambodia "demonstrates significant potential for catching up, fueled again by growing middle-class populations and urbanisation, as well as favourable government policies attracting foreign investment" - Cambodia was ranked #42 on the GRDI 2023 and is a new entrant on the Index. Interestingly the GRDI suggests there is nearly 80 percent saturation in the retail market and there is a high time sensitivity to enter the sector in the Kingdom.
The key story of Cambodia is one of recovery following the COVID-19 pandemic. For two decades the country recorded an average annual growth rate of 7.7 per cent and has secured lower middle-income status with its sights on upper middle-income status by 2030 (and a high-income one by 2050).
Kearney's 2023 Global Retail Development Index says that in the mid-term, due to an increase in public and private investments in infrastructure and newly signed FTAs (foreign trade agreements), strong export growth and foreign direct investment (FDI) inflows are expected.
Some key stories in the eCommerce and digital payments sector have helped fuel growth and its potential.
- Cambodian e-commerce is expected to grow to USD $86.5 million by 2027, growing at a CAGR of 21 per cent from 2022 to 2027.
- New regional trade pacts and agreements, and the development of digital payment infrastructure and banking have boosted the e-commerce market.
- In October 2023, Cambodia signed an eWTP agreement with Alibaba to enhance collaboration in e-commerce, cloud computing, travel, and digital talent.
Cambodia’s Retail Market - An Overview
The Kingdom's retail market was worth USD $13.3 billion in 2022 after growing at 3 per cent from 2017 to 2022. The market is anticipated to reach USD $18.2 billion by 2027, growing at 6 per cent from 2022 through 2027, according to the GRDI report. It adds that many Cambodians still shop at traditional retail outlets (informal retail) which are primarily unregistered and very popular in rural Cambodia, especially with low-income consumers, and that this increased during the pandemic.
Increased tourism and tourism-related retail sectors such as apparel and footwear retailers and jewellery and watch retailers are signalled for improvements in the retail sector. It also indicated there are opportunities outside of developed cities such as the capital of Phnom Penh, as "modern retail outlets are hard to find."
- In H1 2023, Cambodia added more than 39,000 sqm of modern retail space (primarily consisting of malls and retail podiums)
- An additional 83,000 sqm of projects were scheduled to be completed by the end of 2023
- Phnom Penh has seen a modern retailing boom - 51 completed retail stores and 72 projects were under construction.
- Supermarketer Prince Group plans to open 150 stores by 2024 and Thailand’s Tesco Lotus has expressed interest in entering Cambodia soon.
Urbanisation Trends - Impact On Retail in Cambodia
The rising urbanisation and income levels have led to the positive development of modern retail trade, according to the report. It emphasised that there should be growing demand for "high-quality branded products from the expanding urban middle class" which will help drive the growth of modern retail.
- Increasing FDI from China, Japan, Thailand, the United States, and South Korea should fuel the development of the retail sector.
- Cambodian retailers are embracing new concepts such as entertainment-focused retail spaces, including in-mall leisure facilities such as cinemas, arcades, sports, and theme parks to capture more consumers and increase foot traffic.
- International retailers and brands such as Nike, Seven & I, H&M, and Zara have entered the country.
- Foodservice players have also invested in the country - Big C Supercenter PLC, Thailand’s grocery retailer, expects to open 350 grocery outlets and employ more than 1,200 staff in Cambodia by 2026, in various retail formats.
Asia Pacific (APAC) Markets
The global retail e-commerce sector is projected to show a strong increase in sales, according to the report. Until 2027, 64 per cent of growth is expected to come from emerging markets. China and India continue to show an enduring appeal to global investors due to their market size and rapid consumer base growth.
The report adds that across APAC countries, five nations (India, China, Malaysia, Indonesia, and Bangladesh) secured positions among the top 15 economies for retailers to prioritise establishing a presence in, based on the GRDI.
Six Key Trends - GRDI Report
The GRDI report identifies six pivotal trends shaping the retail landscape in emerging markets:
- Macroeconomic uncertainty remains high - the global economic recovery is gradual and varies across developing economies.
- Consumers are trading down to less expensive, local, and private label items due to inflationary pressures.
- eCommerce growth continues - expectations are for it to grow at twice the rate of brick-and-mortar retail by 2027.
- Omnichannel strategies are becoming increasingly important - retailers in developing markets are investing in omnichannel capabilities.
- The rise in e-payments is reshaping consumer behaviour.
- Retail AI and technological innovations are being leveraged to create new, experiential marketing approaches to attract and service consumers.
Please find a link to the full report here: The 2023 Global Retail Development Index.