Agriculture Reference
In-Depth Information
annually),andthethirdwave(China,India,Vietnam)thehighest(40.9percentcom-
poundgrowthrate),asexpectedduetothemostrecentstartersadvancingfastestand
the earliest relatively saturated.2heseratescanbecomparedtoapproximately5percent
annualgrowthinrealGDPover2000-2008intheirst-andsecond-wavecountries,
and7.5-10percentinthethird-wavecountries.EvenattheserapidGDPgrowthrates,
modernretailsalesgrew2-3timesasfastintheirst-andsecond-wavecountries,and
4-5timesasfastinthethird-wavecountries.hisimpliesthatmodernretail'sshareof
the retail pie continues to expand.
Insideacountry,typicallythedifusionhasrolledoutinthefollowingtwosetsof
paths: (1) fromlargecitiestosmallcitiesandinallyintoruraltownsinadaptedformats,
andfromuppertomiddletopoorerclasses;(2) fromprocessedfoodstosemiprocessed
foods to fresh produce.3 These paths are essentially the same as occurred “historically”
(inthetwentiethcentury)indevelopedcountries.
2
. The Determinants of the Accelerated Transformation
The accelerated penetration of retail clashes both with broadly shared self-perceptions
indevelopingcountries,aswellasthepre-1990retailliterature(whereotenoneheard
that somehow the “traditional food culture,” dense cities, low opportunity cost of labor,
and“habitoffrequentshopping”militatedagainstmodernretail).Whydiditoccurso
quickly? Several factors explain it.
First,besidethegrowthinthedemand-sidedrivers(suchasurbanization)being
much faster than had been the case in developed countries as they experienced retail
transformation,therewas,aswithprocessing,aninluxofinvestmentfrombothdomes-
ticsourcesandanavalancheofFDI.RetailFDIliberalizationoccurredintheirst-and
second-wavecountriesmainlyinthe1990sandinmost(butnotIndia)ofthemain
third-wavecountriesinthe2000s—recentlyculminatingforexampleinfullliberaliza-
tionwithWorldTradeOrganization(WTO)accessionbyChinain2004andVietnam
in2009.heupshotisthatmultinationalizationhasaccompaniedtheriseofthemod-
ernretailsectoranditsconsolidation: theshareofforeignirmsinthetop6irmsin
LatinAmericaistheratio4.5/6(whereas,inmostcountries,thetopchainisforeign),
versusabouttheratio3/6forthe“third-wave”countriesinAsiaandRussia(basedon
www.planetretail.net
data).
Yetcompetitivedomesticinvestmenthasalsobeenimportant.Ontheonehand,the
crucialrolethatmassiveinvestmentsbyconglomerates(theirpresenceorsizeorboth
generatedbytheeconomicboomofthepasttwodecades)inthepastfouryearshave
playedinthespectacularriseofmodernretailinIndiaisstriking—evenwithmulti-
brand retail FDI still not allowed. Private domestic investment also created major
regional multinationals—such as South Korea's Lotte investing in China, Vietnam,
Indonesia;andHongKong'sDairyFarminvestinginIndia,China,andSoutheastAsia.
On the other hand, SOE chains continue to be an important investment driver
in the second stage in particular in the “transition” countries. The share of SOEs and
publicprivatepartnerships(PPP),orjointventuresbetweenstateandprivateirms)is
alsoaboutathird($30.5billionofsales)oftheleading47chainsinChina;inVietnam,
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