Wal-Mart Stores, Inc. (Wal-Mart) has remained the world’s largest retailer, according to the 2008 Global Powers of Retail report, from Deloitte Touche Tohmatsu, in conjunction with STORES magazine. The US company increased its lead over second place French retailer Carrefour, with retail sales growth more than double the pace of its rival.

The report shows that total sales for the Top 250 rose to $3.25 trillion in fiscal 2006, up eight percent from the previous year.  In addition, more companies in the Top 250 contributed to that growth.  Only 36 retailers saw declining sales in 2006, compared with 49 in 2005.  According to the report, the average net profit for the group (based on available figures from 187 companies) was 3.6 percent, a small increase from 3.5 percent the previous year. Just seven of the 187 companies reported a net loss in 2006, compared with 15 of 188 companies in 2005.

The big mover was Tesco PLC (Tesco), which overtook German retail giant Metro AG (Metro) to take 4th place, the first movement among the Top 5 since 2003.  In doing so, Tesco also became the 2nd largest retailer in Europe and is gaining ground on Carrefour.  Over the past decade, Tesco has rapidly climbed the Global Powers of Retail list.  In 1996, the company was ranked 18th and by 2001 it had reached 13th.  Between 2001 and 2006, Tesco achieved the fastest compound annual growth rate (CAGR) of any of the current Top 10 retailers in 2006 and continued its ascent into the Top Five.

Top 10 retailers:

Susan Birrell, Consumer Business Partner with Deloitte Ireland said: “The Top 10 retailers’ share of Top 250 combined sales continued to inch up. 

With combined sales of $978.5 billion in fiscal 2006, the world’s 10 largest retailers accounted for 30.1 percent of Top 250 sales, compared with 29.4 percent in 2005.  Indeed, the tenth largest retailer, Schwarz, is growing at a faster rate than its closest rival, Aldi GmbH & Co., meaning the gap between the Top 10 and the rest is widening.”

Ten of the top 50 global retailers have a presence in Ireland. These include Tesco (no 4), whose growth in Ireland is indicative of the company’s global growth; Schwarz (Lidl) (no 10), Aldi (no 11), TJX Cos (TK Maxx) (no 42), Marks and Spencer (no 43), Kingfisher (B&Q) (no 44), Gap (no 45), Baugur Group (no 47), Office Depot Inc (no 48) and DSG International (no 49). In total, 28 of the top 250 retailers have a presence in Ireland.

Chinese and Russian Retailers on the Up

Retailers from China and Russia entered the list for the first time in fiscal 2006. According to the report, a total of six retailers from the two countries have entered the Top 250 rankings, including Chinese retailer Bailian Group, which entered the list at number 101.  The highest-ranked Russian retailer was X5 Retail Group N.V. (X5) at number 191.  

Self-Esteem Spend on the Increase

According to the report, food and other fast moving consumer goods companies represent the largest sector with average 2006 sales of $16.5 billion, but net profit margin for the group averaged just 2.8 percent. Birrell said: “As the basic need for food and shelter becomes increasingly satisfied around the world, consumer spending is turning more toward self-esteem.  This is borne out by the increasing number of retailers in the Top 250 that specialise in selling ‘discretionary’ products.”

There are 49 apparel/footwear companies in the Top 250 in 2006 compared with 40 in 2004.  Consumer electronics stores have increased from 34 in 2004 to 37 in 2006.  Other speciality retailers (sporting goods, furniture and home décor, toys and hobbies, jewellery, auto parts and office supplies) were also on the rise with 88 on the list in 2006 compared with 80 in 2004.

Europeans Expand Abroad to Drive Growth

Facing saturated and intensely competitive markets at home, European retailers are most likely to expand their operations abroad.  On average, French companies had retail operations in 15.1 countries in 2006, while German retailers did business in an average of 13.7 countries.  These rates are more than double the average of 6.2 countries for the Top 250 and significantly higher than US companies who operated in an average of 3.9 countries.

Race for the Rupee

With the geographic mix of consumer spending shifting away from the US towards Asia, retailers from the US and Europe may need to seek opportunities abroad to take advantage of increases in consumer spending in emerging markets, and maintain the growth of their businesses.  One market which could form the next battleground for big retail is India. 

At the moment, India remains relatively closed to foreign investment, its business environment is riddled with obstacles and its rapid economic growth is so new it is not clear whether it can be sustained.  However, Birrell argues: “India is a gamble worth taking.  It is a country which is moving towards a true market economy and has already experienced rapid growth in consumer spending.  The leaders of India’s huge business conglomerates have turned their attention to retailing.  Companies in such disparate realms as energy, telecommunications and manufacturing are recycling their excess cash into creating a modern retailing infrastructure.”

“Investing in India is a long-term proposition, one that can get a foot in the door and the advantage of first-mover status.  It is likely that an increasing number of global retailers and Indian conglomerates seeking out one another for joint ventures over the coming months and years.”

To download a copy of The Global Powers of Retail go to www.deloitte.com/consumerbusiness. 

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