As the Rio Olympic Games put the spotlight on South America, what opportunities does Chile afford UK retail?

For a small country, with a population of just 17.6 million, Chile punches well above its weight when it comes to its retail industry, thanks in a large part to a swelling middle class, competitive business environment and its increasingly sophisticated retail infrastructure. By a wide variety of indicators, therefore, Chile’s retail industry is something UK exporters should not ignore.

And this was certainly a point emphasised by Chile’s current President, Michelle Bachelet, during her 2016 Canning Lecture address to an audience of diplomats, businessmen and policymakers. More specifically, she positioned the country as a vital link for East-West integration.

“As many Chileans work their way up the social and income ladder, spending on personal goods has increased along with demand for credit and finance”

Some 63 million people in Latin America have entered the middle class over the past decade. In the case of Chile, its poverty levels have reduced from 38% to 8% of the population while its GDP per capita soared from US$5,800 to US$23,000.

As many Chileans work their way up the social and income ladder, spending on personal goods has increased along with demand for credit and finance. Youth demographics also favour the retail sector, with approximately 40% of the country’s population aged between 15 and 39. The result: an increasingly young, and affluent, middle class with an appetite for international brands.

More telling for Chile’s consumer potential are the country’s recent retail sales – they were up 1.1% in June despite a decline in other sectors. In April retail sales growth hit 7.9% – the fastest monthly growth in two and a half years. What’s more, in 2015, the country came third in A.T. Kearney’s Global Retail Development Index, a ranking of the top 30 developing countries for retail investment worldwide.

Pro-business

Chile’s appeal is further boosted by its pro-business stance, characterised by low levels of corruption, regulatory and legal transparency and high investor confidence.

In fact, such is the confidence in the market that earlier this year, Falabella, Chile’s largest department store chain – and perhaps the easiest route for exporters to access Chile’s consumer market – unveiled plans to invest US$4bn over the next three years, opening up 131 new stores and 10 shopping malls across Latin America.

“With the highest level of internet penetration in Latin America, ecommerce is also gaining traction”

But Chile’s retail expansion doesn’t stop there. New store formats, such as small boutiques and low-budget stores, are expanding to suburban areas as speed and convenience become increasingly important concepts to consumers. What’s more, with the highest level of internet penetration (72.3%) in Latin America, ecommerce is also gaining traction.

That said, while British brands such as Warehouse, Topshop and Laura Ashley are already enjoying success in Chile, UK exporters, on the whole, have been slow to exploit the country’s strong retail sector and burgeoning middle class.

This is a particular shame given that appetite among Chilean consumers is especially strong for British brands. Indeed, Chileans are, at heart, anglophiles, and the term ‘British’ has long been associated with quality and elegance.

  • Mauricio Munguia is Santander’s Latin American desk head