Colombia Retail Market

[slideshow_deploy id=’1611′] Colombia retail market has become one of the most desired markets in Latin America. The country has come a long way from the days of economic and socio-political chaos. The country’s investment grade is helping attract strong foreign direct investment flows. A recent J.P. Morgan investment survey puts Colombia as the second-most promising country in Latin America for the next three years.  Colombia welcomes imports without protectionist barriers and offers a pro-business environment. The World Bank’s Doing Business 2012 report ranks Colombia as the third-best country in Latin America colombia retail market

Colombia is the third most populated country in Latin America after Brazil and Mexico. The 2011 population topped 46.9 million and is projected to reach 49.3 million by 2015.  Colombia’s  population is mostly young, urban and economically active, according to the United Nations. Colombia’s demographics is the engine behind strong domestic demand , the key driver of GDP, which topped $327.12 billion in 2011. GDP per capita is projected to rise 29% to $9,001.   Colombia’s increased level of security coupled with its strong economy, and growing population have been the catalysts for a dynamic and competitive retail sector which is increasingly attracting international players.

Decades of violence and other factors kept many international retail actors away from Colombia until recently. Such conditions gave birth to a unique, domestic retail sector which now competes and exports several of its brands regionally. Retail sales rose 8.1 percent year-to-year in 2011, according to Colombia’s national statistics agency. The interior market is dominated by over 12,000 small independent retailers. Larger international and domestic players such as Exito (Casino), JBO, and La 14 are using both small (300-500 sq m) and large hypermarket formats to target middle-class customers in the medium and large cities. Domestic players such as Surtimax, Carulla & Pomona are targeting smaller towns and are taking away market-share from informal retailers.

Colombia will add to the existing 156 centers 41 new projects by 2014 , but there is room for growth.The retail sector in 2012 has delivered over 3% increase in sales compared to 2011. Competition within the sector is increasing with the entry of outside developer and retailer groups. Colombia averages 7.4 square meters per 100 inhabitants, below the region’s average of 8.2. Chile’s 14.9 and Venezuela’s 12.7. Projects are concentrated in 43 cities, some of which have above average penetration such as Medellín (17.2), Cali (16.8), Bogotá (15.2) and Bucaramanga (10.3). Recent market entries from foreign developers include  Cencosud, Parque Arauco, Grupo Roble and Spectrum who are bringing  corporate-owned style projects, a drastic change to the traditional condominium shopping center format.  On the retailer side, names such as Falabella, Ripley, La Polar,  Office Depot, Esprit, Payless ShoeSource,  SodimacInditex (ZaraBershka, Stradivarius and Massimo Dutti), Bimba & Lola, Desigual,  are among the most active brands taking solid positions in Colombia’s market. Gap and Forever 21 are two of the latest and most notable entries into Bogota in 2012 and both have plans for additional stores in other Colombian cities. Mexico’s Oxxo already operates 20 stores in Bogota and has plans for 30 more in other cities and towns.

Colombia’s respected luxury retail market continues to attract the world’s best brands. The country’s main cities boast brands such as PradaD&GSalvatore FerragamoCavalli,  Kiton, Canali, Harmont Blane, Hackett, Church’s shoes,  Dolce Gabbana, Hugo Boss, Marina Rinaldi, Louis VuittonLoeweCarolina HerreraPaul & SharkMax MaraVersace CollectionHugo BossAdolfo Dominguez, and Ermenegildo Zegna. Colombia’s luxury watch market is well developed and features brands such as Audemars Piguet Bvlgari , CartierChopardMontBlancRolex, and  Patek Phillippe.

United States QSRs were the first to introduce the franchise model to Colombia’s market, however newcomers from Brazil, Chile, Peru and Europe now share the market. Fast food continues to be the largest franchising sub-sector with internationally known names such as Burger KingPizza HutMcDonald’sBaskin RobbinsDomino’s PizzaHooter´sHard Rock CaféYogen FruzSubway, Taco BellTGI FridaysDunkin Donuts, and Kentucky Fried Chicken. The franchise model in Colombia is also present in other sectors with firms such as CurvesPostnetFast SignsSwarovski, and Mango; service provider Mail BoxesKumonTruly Nolen, Coldwell BankerCentury 21, and Wall Street Institute.

Retail sub-sectors likely to see strong growth include food and drink, with sales expected to rise by more than 76% between 2011 and 2015, from $39.04 billion to $68.87 billion, according to Business Monitor International (BMI). Growth in mass grocery retail (MGR) sales is expected to outstrip overall food sales by 83%, with MGR’s share of the overall food market predicted to grow from 33.8% in 2011 to 35.0% by 2015. Sales of consumer electronic products are forecast at $4.21 billion in 2011, with predicted rise of 51.4% to $6.37 billion by 2015, according to BMI. Consumer electronics spending per capita is projected to rise 45% to about $115 by the end of 2015, following growth in key digital products groups such as computers (which have only 13% penetration), notebook computers and digital TV sets. Modern and sophisticated retail formats are increasingly popular with consumers and further growth is expected, particularly in the hypermarket and smaller supermarket or express store formats. BMI estimates that Colombia’s retail sales will amount to 9% of Latin America’s $1.3 trillion retail market in 2011 and 8.6 % by 2015 when the region’s retail sales will reach $3.1 trillion.

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