In a latest report published by McKinsey & Company, global grocery chains or hypermarkets are seen struggling to grow profitably in emerging markets.
The primary reason for this lies in the context of the local environment these hypermarkets operate in; where good road networks, high car ownership rates and larger living space in suburban and rural areas exist in Western Europe and the US, this is not necessarily the case in emerging markets. In the latter, consumers are generally less affluent, have lower car ownership rates, and live in major metropolitan cities where space is limited. As a result, the premise that allow hypermarkets to compete effectively in the western world does not translate to success in emerging markets.
In order to grow profitably in emerging markets, McKinsey lists seven elements for success:
- Prioritize proximity to consumers
- Keep prices low and make sure the consumers know
- Keep close watch over productivity
- Make the business case to manufacturers
- Educate policy makers
- Consider partnering with traditional trade (e.g. mom and pop stores)
- Adopt a city-based strategy where the majority of consumers are located