Bringing Value in the Retail Sector, Investing in Progress
Since 1984, IFC has prioritized support for the retail sector in developing countries around the world. Retail is a key sector for growing economies: a strong source of job creation and tax revenue, and a path to better health and quality of life as access to consumer goods expands.
Much of our investment has focused on three high-impact sub-sectors: grocery stores, shopping centers, and general merchandise retailers. As of June 2013, IFC has committed more than US$600 million of long term and short term financing in the retail sector.
Retailers today face many challenges. Globalization and consolidation of retail is accelerating, driven by faster growing markets in developing countries. Green retailing for global retailers has moved from “nice to have” to “must have” as both customer and regulatory demands tighten for the industry.
Low-income store concepts will continue to be significant, leading to value-for-money.
Growth in terms of the multiplicity of geographic, online, and format offerings, will allow retailers to target different shoppers, cater to different shopping occasions, and sell different categories of products.
Vertical integration spurred by ethical and health concerns: traceability is a growing trend. Private label food and non-food categories are enabling many retailers in developed and emerging markets to grow. E-commerce through the dynamic growth of efficient, low-cost, Internet retail is putting pressure on other retail sectors.
In emerging markets, these are more difficult challenges to tackle and a company’s costs can soar. IFC’s unique blend of financial products – including loans with long tenures and advisory services – provides added benefits to client companies, helping make investment into these markets a viable option.
Expertise across Subsectors
IFC’s sector expertise, regional knowledge, and leadership in sustainability offer significant value to clients, in addition to the full suite of financial products we offer. Our retail projects in several broad subsectors include the full range of retailing, shopping malls, entertainment, and distribution (warehousing and logistics). Within the retail sector, IFC has financed supermarket and hypermarket chains, apparel distributors, specialty shops, coffee shops, do-it-yourself stores, and electronics stores. IFC is encouraging new and experienced players to invest in projects that blend profit potential with job creation and environmental stewardship, a combination that can benefit companies, local consumers, and the country as a whole.
Building Local Supply Chains
While IFC retail projects vary in type, size, and country, they share one core component: a role in cultivating local supply chains. For our clients, local supply chains mitigate foreign currency exchange risk and can greatly reduce the cost of goods, improving the bottom-line profit that is critical for a sector typified by slim margins. A competitive, reliable local supply chain can help maintain price points so that retailers can differentiate themselves as more players enter the market. The local economy as a whole benefits as well with the development of new, related industries such as, agribusiness, food processing, light manufacturing, warehousing, and distribution creates jobs, contributes to the tax base, builds local banking capacity, improves infrastructure, and raises labor standards. In turn, these economic benefits create wealth and disposable income, resulting in more spending on retail goods.
IFC also encourages the companies we work with to include green building-friendly policies. We try to find a common ground between the client’s business interests and what green buildings can offer, including improvements in energy efficiency, enhanced sewage treatment, water and waste disposal audits to improve costs savings, etc.