Chile Retail Market

[slideshow_deploy id=’1622′] Chile retail market is one of the most mature retail market in Latin America. Although the Chile retail market only represents 3.9 % of Latin America’s total retail sales, the southern cone nation of 17.1 million people has established itself as a sophisticated regional retail destination . Chile has enjoyed over 3 decades of socio-economic and political stability which has steadily attracted foreign investment. GDP growth for 2012 was projected to reach 4.9 % according to ECLAC and the IMF and continues to be driven by industrial output, domestic consumption,and transportation (Imacec). Chile’s per-capita GDP is one of Latin America’s strongest and is estimated at $16,000. chile retail market

The Chile retail market  had 57 shopping malls  in 2012 with a total GLA of 2.8 million square meters. Shopping center penetration is 21%. Chile retail market is tightly dominated by five main actors, Cencosud (38% market share), Falabella (28%), D&S Walmart (21%), Ripley (10%), and La Polar (4%). Chilean supermarket penetration level of 65% is higher than its neighbors, Brazil 53%, Colombia 44%, Argentina 31%, and Peru 17%. Supermarket sales represent 26 percent of total retail sales (CCHCC).

The Chile retail market grew by 10 percent in 2011 as a result of increased middle-class purchasing power, a younger, urban population, and government incentives to stimulate retail consumption. Chilean retail operators Cencosud, Falabella, Walmart Chile and Ripley  invested close to  $2.5 billion in 200 new stores of various formats. This represented a 53 percent increase from 2010. Parque Arauco and Pension Fund Aurus entered into an agreement to build strip centers. Strip center absorption is strong and reaching pre-crisis levels (2008-2009).

Due to its retail market sophistication and manageable size, Chile serves to many international retailers as a test market for the rest of Latin America, particularly to Argentina, Peru, and Colombia. The key to Chilean retailers’ successful expansion is that Chilean retailers have developed a competitive culture and business model, which can be exported to its neighbors. Many international brands have found success in Chile while others have not. The most notorious failures were CarrefourJC PenneyHome Depot, Muricy (Brazil), Gala Sears, Royal Ahold (Dutch) who arrived in Chile with great expectations, but left after a short time due to huge losses. Among some of the reasons for failure were high local competition, economies of scale, and lack of local market knowledge.  Gap, Inc. recently entered Chile through a franchise agreement and opened its first South American store in Santiago’s Parque Arauco Mall,  a second one in Concepcion at  Plaza Trebol Shopping Center, and has plans to take the brand into into Peru through a subsidiary. The international QSR universe in Chile has been active since the 1980s through the franchise model. Brands currently operating there include McDonald’s, Burger KingSubwayKFCPizza HutTaco Bell, Domino’s Pizza, and several others. An important aspect about Chile’s franchising sector is that domestic franchises today outnumber U.S franchises.

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