Despite global economic problems, there are still opportunities for retailers to expand internationally. Rebecca Thomson reports on three markets that look likely to bear fruit.

Barely a month goes by without UK retailers venturing further into international waters – in September, M&S said it would roll out its ecommerce operation to 10 more countries by the end of the year and in October, Debenhams opened its first store in Russia, for example.

International trading is the first port of call for retailers interested in longer term growth, but as countries worldwide experience a growth slow-down, even this high potential route to growth isn’t straight-forward. Retail Week takes a look at three markets that have been getting positive retail press lately – Germany, Turkey and Indonesia.

Germany - Value opportunities

Primark sees potential for 150 stores in Germany

Primark sees potential for 150 stores in Germany

2012 figures

81.61 Inhabitants (million)

£2.06trn GDP

1% GDP Real Growth

1.9% CPI %

£25,229 GDP / capita

£14,585 Consumer spending / capita

Source: Planet Retail/currencies converted from US$

Why does it appeal? Germany is the biggest economy (and current saviour) of Europe, with a population of almost 82 million and expected GDP of $3.31trn (£2.06trn) in 2012, according to Planet Retail. While the rest of the continent stagnates or faces crisis, Germany continues to produce strong figures and for many, represents the biggest opportunity in the region. George Wallace, chief executive of international consultancy MHE Retail, says: “It’s the strong man of Europe in terms of economic management. The Germans create wealth, despite having their pockets picked by some of their less industrious colleagues in Europe.”

What the experts say: It is possible to do well in Germany – value fashion retailer Primark is understood to be enjoying great success in the country, and the retailer said there was potential for an eventual 150 stores there. But those wishing to make a similar move should take heed: German shoppers are notoriously sensible. Credit-fuelled consumer spending is not their thing, which is partly why the country has avoided the worst of the recession. It can make it harder for those in the mid-market or above to convince shoppers to part with their hard-earned cash. “It can be quite a difficult consumer to woo and win over,” says Wallace.

Planet Retail chief economist Boris Planer says retailing in Germany is a business of tight margins and value offers – shoppers prefer to tighten their belts on food and fashion to pay for holidays and automobiles. Discount retailers Schwarz Group and Aldi are the third and fourth biggest grocers by sales. “It’s a cultural preference,” he says. “The Germans travel a lot and have big cars, and they save for that by buying food as cheaply as possible.” That means that while the German economy has performed well over the past couple of years, retail sales have fallen from $7,290 per capita in 2008 to an expected $6,468 in 2012.

That is not to say there aren’t opportunities.

Any retailer with a value offer is likely to do well. Planer says there’s a big opportunity in young fashion – German teenagers, like others, are fashion conscious. And the convenience food market is growing as shoppers move away from hypermarkets. Peter Gold, head of cross border retail at property agency CBRE, says it can be worth plugging away to overcome consumers’ caution, and that brands including Desigual and Urban Outfitters have entered the market successfully. “It doesn’t have the same penetration of international brands as other markets, perhaps because it’s challenging to enter,” he says.

Turkey - Strong growth

Istanbul’s Cevahir mall is one of Turkey’s many shopping centres

Istanbul’s Cevahir mall is one of Turkey’s many shopping centres

2012 figures

74.89 Inhabitants (million)

£503bn GDP

2.3% GDP Real Growth

10.6% CPI %

£6,754 GDP / capita

£4,620 Consumer spending /capita

Source: Planet Retail/currencies converted from US$

Why does it appeal? Turkey has been in the spotlight as a good potential manufacturing base. Costs in Far East countries such as China are rising, and Turkey’s location is another advantage – being closer to the UK means it’s easier for retailers to respond to demand. But as Kingfisher is happy to attest, it’s also an increasingly strong potential consumer market. Kingfisher is working with Turkish conglomerate Koç Group to roll out its Koçtas chain, and hopes eventually to have 100 stores in the country.

What the experts say: The Turkish market is attractive because it combines Asian-style growth with European sensibilities, making it less difficult to adapt a retail offer than it is in China or India.

CBRE’s Gold says Turkey offers the benefits of a young, ambitious population and strong economic management. It also has a fairly well developed network of shopping centres. But, he adds some of its neighbours, such as Syria, are a cause for concern: “It does sit on the cusp of other territories that are seen with a bit more anxiety. There’s a bit of wariness from a geopolitical perspective.” And while there are more cultural similarities in Turkey than in other fast growth economies, starting a joint venture with a Turkish operator to help retailers adapt their model is advisable.

Wallace points out that the population is concentrated around major cities, and about 20 million live in Istanbul and its suburbs. Consumer spending is strong, playing a big role in helping Turkey maintain its GDP growth.

Indonesia - Young population

There is a market for fashion in the Indonesian capital Jakarta

There is a market for fashion in the Indonesian capital Jakarta

2012 figures

244.47 Inhabitants (million)

£575bn GDP

6.1% GDP Real Growth

6.2% CPI %

£2,351 GDP / capita

£1,233 Consumer spending /capita

Source: Planet Retail/currencies converted from US$

Why does it appeal? Consultancy Deloitte is a fan of Indonesia. Its 2012 Hidden Heroes report, which aims to identify emerging markets beyond China, supports the argument that Indonesia is equivalent to the BRIC group. Brazil, Russia, India and China were identified by Goldman Sachs economist Jim O’Neill in 2001 as the four economies likely to be the world’s most dominant by 2050, but some have said Indonesia should have been included instead of Russia or Brazil. Deloitte’s report, by director of global economics Ira Kalish, says: “Indonesia, with 200 million people and a fast growing economy, is an emerging star with a potentially very bright future.”

What the experts say: Kalish points out that Indonesia’s population is young – around a third are under 15 – and will continue to be so in the near future. It is the fourth largest population in the world, something that is attractive to retailers – a young and growing population is good news for consumer spending. Much of the potential purchasing power is in the capital Jakarta, home to 8.5 million people. French retailer Carrefour entered the country in the late 1990s, and has prospered since implementing a rapid expansion plan in 2004.

But strong economic growth and a large population won’t guarantee Indonesian success and there is no assurance of a smooth entry into the market. Planer points out that there is still corruption in the country, and that its geography – it comprises thousands of islands – will make it hard to cover. There is work to do on infrastructure, but the urban centres will be worth investigating, especially for non-food retailers. “There’s a very attractive market for fashion in Jakarta,” Planer says.