Retailers today face many challenges, such as keeping costs low and supply chain efficiencies high; protecting the brand and reputation; responding rapidly to changing consumer tastes; expanding to penetrate new markets; and ensuring that their businesses comply with international environmental and social standards. In emerging markets, these challenges can increase exponentially—and costs can soar.
Retail is a strategic sector for IFC because of its high development impact. Since entering the sector in 1994, we have invested in 23 companies around the world. Our retail portfolio of nearly $600 million represents 33 investments in 15 countries. We also share knowledge with key players in the industry.
Most of our clients are small to midsize retailers in developing countries, but we also finance large regional and international groups, supporting their efforts to invest in emerging markets.
Our retail projects worldwide fall within several broad subsectors: retailers, shopping malls, entertainment, and wholesale and distribution.
Retailers: Expanding Consumer Options
As economies grow in Southeast Europe, there is increasing demand for more varied and better-quality goods. In 2006, IFC provided a long-term loan of €40 million to support Mercator, a leading retailer in Slovenia. The loan will help the company expand into Bosnia-Herzegovina and Serbia, focusing on building hypermarkets and supermarkets, as well as supporting the development of local supply chains.
Mercator employs about 25,000 people and operates 1,200 stores, groceries, and hypermarkets, mostly in Slovenia. Stores sell fast-moving consumer goods, clothes, furniture, and household appliances. The company aims to meet growing demand for high-quality retail services in the region by increasing its sales outside Slovenia to 45 percent of total sales over the next seven years, becoming the region's leading retailer.
Shopping Malls: One-Stop Convenience Shopping
As consumer incomes grow in emerging markets, there is increasing demand for the kind of modern, one-stop shopping experience offered by shopping malls. In El Salvador, IFC invested $25 million in 2003 to support Grupo Poma, operator of the largest shopping mall in Central America. The funds helped finance construction of Multiplaza Panamericana, the first multipurpose shopping mall in San Salvador. The new mall features two anchor department stores, movie theaters, a supermarket, shops, restaurants, a financial center, and a food court.
With IFC's support, this project has produced more than just a shopping mall; in fact, it has been called a "small city" by local officials. Ultimately, Multiplaza will include apartments, offices, and a hotel. In 2006, we provided a follow-up loan to help Grupo Poma build shopping malls in Honduras and Nicaragua.
Entertainment: Safe, Affordable Leisure
IFC's support of projects in the entertainment industry helps provide safe, affordable leisure outlets and cultural opportunities, especially for young people. In Russia, we are helping Cinema Park build more movie theaters to meet growing demand. The $20 million loan that we committed in 2005 will enable the locally owned company to create a chain of 12 multiscreen cinemaplexes, building on the success of its two theaters in Moscow.
Given Russia's underdeveloped media and entertainment industry, IFC's role was critical. The project, our first with a cinema chain, has provided many benefits, including creating several hundred jobs, encouraging growth in the Russian film industry as a result of increased demand for locally produced movies, and helping curb counterfeiting by increasing the supply of affordable, legally distributed films.
Wholesale and Distribution: Building Local Supply Chains
IFC invests in a variety of distribution-related activities, helping develop strong local supply chains as a means to build businesses, boost economies, and create jobs. In Cameroon, for example, we provided the critical funding in 2003 for UC-Pharm's new pharmaceutical distribution venture. Our $2.1 million investment helped the company import and sell pharmaceuticals to local drug stores from two new distribution centers in the country, expanding access to lower-cost generics.
Our support of UC-Pharm was vital, given the limited financing options locally and the risk-averse nature of the local banking sector. The company's future plans include developing local manufacturing capacity.
Development and Economic Impact |
IFC's retail projects have created:
- More than 32,000 direct jobs and thousands of indirect jobs
- New local industries, including agribusiness, food processing, wholesalers, suppliers, manufacturers, distribution, and logistics
- Improved environmental management systems, leading to reduced ozone emissions and greater energy efficiency
- Better product choice, quality, and affordability for low-income consumers
- Increased access to food supply and consumer goods
- Improved hygiene for food safety
- Lower prices through increased competition and efficiency gains
|
Sharing Knowledge with Key Industry Players
IFC recently participated in the World Retail Congress, sharing its perspective on the increasing opportunities for investment in the retail sector of emerging markets. This year's first-ever congress, held in Barcelona, Spain, gathered about 70 percent of the world's major retailers and leaders in the industry.
IFC Director of Global Manufacturing and Services Dimitris Tsitiragos participated in the opening session as keynote speaker. He talked about the untapped potential for retail in emerging markets and the ability of these markets to become the major drivers of growth in the retail sector moving forward.
"There is a tremendous business opportunity for retailers in emerging market nations, where incomes are rising and demand for consumer goods is growing. At the same time, the development of the retail sector in these nations will help create wealth and broader economic growth, further deepening the demand for goods," said Tsitsiragos.
IFC also hosted a roundtable discussion with the delegation from China, to explore opportunities to tap into the nation's massive purchasing power potential, while creating new jobs and cultivating local supply chains. IFC participants also led a discussion on the Corporation's strategy and projects in emerging markets.
About the World Retail Congress |
The annual event was created in response to the demands of retailers in both developed and emerging markets, and is supported by major international players, including AlShaya, AS Watson, B&Q, Carrefour, Ikea, Marks & Spencer, and Tesco. The World Retail Congress brings together retail leaders for high-level debate with international policymakers. The aim is to drive growth in the global retail economy, promote the benefits of global retail excellence, and gain a sustainable, competitive edge in domestic and international markets. For more information, visit www.worldretailcongress.com.
|
For more information contact:
Carmen Powell
Communications Officer
Phone: (202) 473-4982
E-mail:
cpowell@ifc.org
Published May 22, 2007
