As Waitrose inks a deal to supply products to Chilean grocer Unimarc, Retail Week explores the retail opportunities and challenges in one of South America’s most developed countries.

Waitrose has added another bow to its international retail string, as shoppers in Chile will soon be able to pick up its own brand products from teabags and biscuits to stuffed olives and pasta to their shopping baskets, thanks to an export deal with Chilean grocer Unimarc.

On first thoughts Chile might not appear to be the most obvious match for Waitrose, one of the UK’s most premium supermarkets, but the string bean-shaped country is actually one of South America’s most developed and prosperous nations with a GDP of €228bn (£195bn), up 4.9% on last year. The country is also one of the most urban countries in Latin America, with 85% of its 17 million strong population living in urban areas.

“There tends to be a misconception about this region,” explains Carlos Hernandez, retail analyst at Planet Retail. “Many people consider South America to be an under-developed region… however many of its stores are better than some stores in Europe. Chile is quite a sophisticated market and it’s definitely the most advanced retail market in South America. Chile’s economy is developed within South American standards, although it’s not caught up to Western Europe as yet.”

The move by Waitrose comes after a recent report by Planet Retail found that Chile’s retail sales are expected to advance this year as a result of the increase in the economic growth in turn affecting retail sales positively.

“There is room for further increases in retail sales, both in food and non-food, as more Chileans become wealthier and eager to consume,” it reads.

With a wealthier consumer base, Hernandez says Unimarc and Waitrose could be a perfect match. “Unimarc used to be run down but now they’ve changed it to be more upmarket and so this deal with Waitrose is in line with their new positioning,” he says.

However, Hernandez does question the strength of Waitrose’s current brand awareness in the South American market. “I don’t see how the Chilean middle class would know about Waitrose, or even the Spanish. Waitrose has never opened in South America before and, although Harrods once had a presence in Argentina, I don’t think Waitrose has had anything similar.”

With a concentrated grocery market - the top five players accounting for around 40% of the market, according to Planet Retail - the best way to enter the market is through a local player, like the Waitrose deal. “It’s a good way to explore the South American market as Chilean retailers are very well-positioned in South America so Chile is a difficult market for foreign retailers to operate in,” says Hernandez.

French multinational retailer Carrefour was forced to pull out of the market in 2004 after its business failed to capture the imagination of the Chilean consumer. “They thought they could replicate what they had done in France and it didn’t work,” adds Hernandez.

One successful foreign player to enter the country is Walmart, which moved into the market in 2009 when it acquired D&S and soon began trading as Walmart Chile. This in turn has led to Asda’s George clothing range being introduced to its Chilean stores for the first time last year.

While the number of international grocery players in the Chilean market is relatively small, there does appear to be more opportunity for clothing retailers with fast fashion foreign exports taking the plunge into the market. Topshop entered the market towards the end of 2011 with a standalone store in the Alto Las Condes mall in Santiago while Swedish clothing retailer H&M has said it plans to open its first store in South America in the first half of 2013, with a full flagship located at the Costanera Center shopping mall in Santiago.

With a booming economy, now could be the time for international retailers to take a slice of Chile’s growing retail market.