GLOBAL RETAIL

FREEVIEW
A free synopsis of global retail
news and opinion
June 10, 2010
 GLOBAL RETAIL FREEVIEW
June 10, 2010

A free synopsis of global retail news and opinion

Welcome to the latest edition of Verdict’s Global Retail FreeView, in which our analysts bring you a roundup
Verdict Research is a retail information
of all the major events, news and views in the international retail sector.
specialist within the Datamonitor Group.
With over 25 years' experience, Verdict
In this issue we take an in-depth look at Inditex’s entry into India and, in collaboration with
publishes unrivalled independent
Datamonitor’s Cards & Payments team, we investigate Visa’s new CodeSure card. We also introduce our
analysis. Our reports, briefings,
new Childrenswear Retail in Europe report.
consumer research and consulting
services provide clients with a complete
picture of the UK and increasingly the
international retail arena, helping
retailers, manufacturers, service
LATEST GLOBAL RETAIL NEWS RETAIL VIEW FROM EUROPE LATEST VIEWS AND OPINIONS suppliers, analysts and consultants to
fully exploit opportunities within the
sector.
ELECTRICALS & HOME
LATEST REPORTS & ANALYSIS
Gome becomes the largest distributor of LG-branded products in China
China’s electricals retailer Gome has signed a contract with LG Electronics Inc to become the largest distributor of LG’s
products in the country. The contract has allowed the retailer to climb 13.7% on the Hong Kong stock exchange. The
Latest reports
retailer expects the contract to raise CNY9.3 billion (€1.1 billion) in revenues in 2010, predominantly from television Verdict produces a range of reports
sales. analyzing the key players in various
retail sectors throughout Europe and
the rest of the world.
Beijing’s trade-in policy has been extended
Beijing has extended its trade-in policy for domestic electrical appliances. The policy, which will now close at the end of
2011, allows customers in certain areas to gain a 10.0% subsidy on new domestic appliances when trading in their old Childrenswear Retailing in Europe
ones. Moreover, it has helped to generate demand for manufacturers and retailers to increase production and
Global Department Store Retailing
distribution of these goods.
Shopping Centers in Europe
Kingfisher issues flat Q1 results
Kingfisher, parent company of DIY retail chains B&Q and Castorama, has announced flat Q1 sales of £2.6 billion (€3.0
billion). However, profit during the period saw a 12.0% increase, at constant currency, to £146m (€168m). Its
Castorama network in France showed the strongest performance, with a 2.0% increase in like-for-like sales.

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CLOTHING, FASHION & PERSONAL CARE
Boots Advantage Card to be extended to other retailers
UK health and beauty giant Alliance Boots plans to extend its Boots Advantage
Card loyalty scheme to incorporate other retailers in a bid to compete with
Sainsbury’s Nectar loyalty scheme, which has the most registered card holders
in the UK at 16.8 million (there are 16.4 million Boots Advantage Card holders).
The move comes in the wake of its recently announced partnerships with
Waitrose and Mothercare and will allow it to capture further sales opportunities.
H&M plans to enter Turkey
Swedish fast fashion retailer H&M has joined the likes of Carrefour and Marks &
Spencer by expanding its presence into Turkey. H&M is opening its first store in
the country in the Forum shopping center in Istanbul, which measures around
2,300 square meters. The store is due to open in November 2010.
George Davies on course for international expansion
George Davies plans to open a network of 60 childrenswear stores in Egypt and
Saudi Arabia, marking the British retail mogul’s first foray into the Middle East.
The stores will be a completely new retail concept for Mr Davies and will be
launched as part of a joint venture with the Fawaz Alhokair Group, which
already owns 11 shopping centers in Saudi Arabia. Menswear and womenswear
lines will be introduced into the market in the future.
Zara’s net sales grow 14.0% in Q1
Inditex has released very encouraging trading results for Q1 2010. Total group
sales rose by 14.0% to €2,665m, with gross profit surging 20.0% to €1,598m.
Net income totaled €301m, 63.6% higher than the year before. An increased
store expansion rate contributed substantially to overall sales growth, with 98
net store openings during the quarter. The Stradivarius chain saw the most new
stores after Zara. Plans for the remainder of 2010 include launching online Zara
stores in September 2010.
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LATEST VIEWS AND OPINIONS LATEST REPORTS & ANALYSIS
FOOD & GROCERY
M&S is the first UK retailer to sell Fairtrade vegetables
Marks & Spencer has become the first retailer in the UK to sell vegetables
certified by the Fairtrade Foundation. The UK-based retailer has launched
Fairtrade Kenyan-grown green beans in its stores, with other vegetables from
the region, such as mange tout beans, garden peas and sugarsnap peas, soon
to follow. The retailer already sells Fairtrade flowers and some fruit, and
reported an increase of 40% in sales of these products last year.
Ahold posts robust Q1 results
Dutch retail group Ahold, which operates Albert Heijn supermarkets in the
Netherlands, has reported positive Q1 trading results. Sales rose by 1% to €8.7
billion, while net profits surged 46% to €274m in the period to March 31.
However, operating profit increased by a respectable 3.3% to €409m. It is
currently fueling growth through continued expansion in the US and also a
planned entry into Belgium, where Albert Heijn will compete directly with
Belgian grocer Delhaize.
Waitrose to open stores in Bahrain
UK-based grocer Waitrose is to further its entry into the Middle East by opening
a store in the island kingdom of Bahrain. The retailer, which is already present
in Dubai, will open a 2,000 square meter supermarket in The Lagoon shopping
center in December 2010 in partnership with Fine Fare Food Market. Waitrose is
clearly targeting regions in the Middle East, which has a growing population of
high earners. The move will allow it to capitalize on the rising demand for
premium foods.
LATEST GLOBAL RETAIL NEWS LATEST VIEWS AND OPINIONS LATEST REPORTS & ANALYSIS
RETAIL VIEW FROM EUROPE

Russian grocer X5 returned to growth in its

Apple’s iPad has been launched in DSGi’s
first quarter. Profits reached $78.9m
Currys and PC World stores in the UK as part
(€64.3m) while sales increased by 36% to
of a deal to sell the product 60 days before
$2.54 billion (€2.07 billion). Although the
it is available at rival stores. The iPad can be
company made gains due to continued
found in 70 PC World stores, 28 Currys
growth, including the acquisition of
stores, 22 Dixons Travel stores and 19
Paterson, margins were squeezed due to
combined PC World/Currys stores.
high levels of discounting.

Polish convenience retailer Zabka has

German clothing retailer New Yorker is launched 70 private label goods in its stores.
extending its presence in Eastern Europe. The retailer plans to extend the range to
The retailer is already present in Serbia, 200 by the end of 2010 due to growing
Croatia, Slovenia, Bulgaria and Romania, as demand for lower-priced groceries in the
well as in Bosnia, where it plans to open its downturn. Zabka is among a number of
third store. Montenegro is its next target European convenience retailers to introduce
market; it recently opened a store in the a range of staple goods under its own brand.
Delta City Montenegro shopping center in At Zabka, private label products include
the capital, Podgorica. tinned food, dairy goods, cold meats and
alcoholic beverages, all priced around 30%
less than their branded alternatives.

Europe’s leading grocer Carrefour is

introducing its Carrefour Discount private
Germany’s Schlecker is to extend its
label range to the Spanish market. The
pharmacy chain to the Czech Republic. It
range will consist of 300 lines of groceries
already has seven stores under the
and health and beauty products, and will be
Schlecker Lekarna (Schlecker Pharmacy)
available across the entire network in the
fascia in cities including Prague and Liberec.
country, including convenience stores and
The pharmacy chain will focus on offering
online. The launch comes in response to
pharmaceutical products and services as well
heightened consumer demand for low-price
as cosmetics.
goods.

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LATEST VIEWS AND OPINIONS

INDITEX: FIRST ZARA STORE OPENS IN INDIA

The Inditex Group has opened its first Zara store in Delhi, India. The Indian market shows great
growth potential and will make a considerable contribution to total sales in the long term.
However, several challenges remain in the form of a 51% limit on FDI and significant cultural
differences. Nevertheless, Inditex's unique distribution strategy should allow it to gradually adapt
to the market.

Inditex opened its first Zara store in India on May
29, 2010 in the Saket region of Delhi, having
announced its plan to do so in September 2007. In
accordance with Indian regulations on foreign direct
investment (FDI), the Spanish fast-fashion retailer
partnered with the Tata Group, India, to form a
joint venture in February 2009. Inditex owns 51%
of this partnership while Tata's subsidiary Trent
Limited holds 49%. Due to various challenges the
company faces, store expansion will remain slow,
with only one further store opening planned for
2010.
Inditex has relied heavily on global expansion to
maintain its sales momentum due to the heavy
impact of the downturn in its domestic market.
Indeed in 2009, 98% of new stores opened outside
of Spain. Asian markets are a particularly strong
source of growth for Inditex. It already operates
stores in South Korea, China and Japan, where it
opened a combined 63 stores in 2009.
Similarly to China, India presents lucrative potential Despite these challenges, Inditex has been the first
in the form of a rapidly growing middle class. of its main rivals, H&M and Gap, to take the leap.
Moreover, its clothing retail expenditure is forecast Zara has the advantage of having a much shorter
to grow at a faster rate than neighboring China with range turnover cycle, at two weeks, and is able to
a CAGR of 6.7% in the period 2009–13, compared respond quickly when specific categories and
to China's 5.3%, according to Verdict's Global Retail designs fail to sell. As such, Zara is well equipped to
Database. deal with a new and unexplored market and will
benefit from capitalizing on growing demand within
However, the company faces several hurdles. the retail sector.
Current regulations on FDI in India stipulate that
foreign single-brand retailers must pass a 49%
stake to a local partner. This involves the retailer
sharing company details and data it would not
normally divulge. Furthermore, franchising stores
means that the retailer loses some control over how
these are operated, which many companies fear
may damage their brand. Consequently, single-
brand retailers are often wary of entering the Indian
market. For a clothing retailer like Zara, additional
concerns include the relative lack of seasonal
variation and the distinct, consolidated style of
dress among Indian women which differs greatly to
Zara's existing ranges.

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VISA: CODESECURE IS COMPELLING, BUT MAY PROVE DIFFICULT TO LAUNCH

Visa CodeSure, a card with an embedded screen and numerical keypad, is ready for launch. By
entering their PIN, consumers can generate one-time passcodes that can be used in place of
static passwords for online transactions and banking. However, despite its clear anti-fraud
benefits, convincing banks to invest in portfolio upgrades while economic uncertainty prevails will
prove challenging.

The Visa CodeSure card operates as a standard chip
card, but also incorporates an eight-digit
alphanumeric display, a button keypad and a
battery with a three-year lifespan. With this card,
consumers can generate a one-time passcode (OTP)
by entering their PIN into the keypad on the card.
As innovations go, this is certainly very interesting.
One of the problems with 3D Secure and many
online banking platforms is their reliance on static
passwords, which consumers can forget, thus
halting transactions (to the disappointment of
retailers), and which fraudsters are finding easier to
capture or have reset.
Using dynamic passcodes is therefore the most
sensible approach, but current solutions require
consumers to have some form of hardware at the
point of transaction. Mobile phones and chip card
readers (such as Barclays' PINSentry keypad) are
existing forms of such technology, however, having
to carry extra hardware in order to carry out
transactions risks inconveniencing customers purely
to benefit banks. This immediately reduces
consumers' willingness to use the technology.
Integrating a tool to create an OTP into the card
itself means that consumers only need to keep one
item with them to make a card payment on the
internet, and that is the card itself.
Clearly then, this is a solution that provides
potential benefits to the card-issuing bank (in terms
of lower fraud losses), and creates no material
inconvenience for the consumer.
However, there are some further points to consider.
The first, and most important, is cost. In the UK,
the cost of the EMV rollout was around £1 billion.
Precise costs for the CodeSure product are not
available, but information released by EMUE
Technologies (which developed the product with
Visa) in January 2009 suggested that the difference
in cost between a standard card and a card with
embedded keypad and screen was a multiple of
five. Even if the cost of a standard card has reduced
by half and the multiple is now only three times,
the cost of upgrading all cards in the UK would be
in the region of £1.5 billion. Fraud losses to CNP,
online and telephone banking in 2009 were
£338.2m.
In many ways, it is wrong to use the EMV
comparison, as industry-wide adoption is by no
means a given (particularly if it is not licensed to
MasterCard). However, it does suggest that any
bank launching CodeSure would need several years
to recoup its investment.
Of course, this is perfectly reasonable to expect, but
due to the current widespread economic
uncertainty, this will be a difficult argument to win
with hard-pressed banks. The second point is how
this fits into the wider online payment space.
MasterCard has approached this issue from a
different angle in developing one time number
technology, which creates a unique card number for
each transaction. This essentially achieves the same
end result, but without the need to reissue the
plastic card. Whether consumers or merchants
prefer one over the other is somewhat open to
debate until penetration rises.
Regardless of implementation costs, the ability to
integrate OTPs into online banking logins as well as
into online commerce means that it is likely to
prove popular with banks. The response from
MasterCard will therefore be worth watching, as it
may well look to license the technology from Visa.
What will be really interesting to see though is how
this can be integrated with contactless. If it can be
used to allow consumers to pre-enter their PIN
before the point of sale, it could make contactless
the only way in which cards are presented in the
future.

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CHILDRENSWEAR RETAIL IN EUROPE Scope of this report

Key sector statistics including clothing

Verdict’s report on CHILDRENSWEAR RETAILING is an assessment of the children's and childrenswear expenditure, spend
per child, and growth from 2004 to
clothing market in Europe, including market value, details of the core childrenswear
2009e in each of the EU27 markets.
retailers, and the strategies being deployed by the various players in the sector,
including child specialists, childrenswear specialists and fashion multiples.
Analysis of emerging players and the
sector's most prominent competitors
including ID Group, Mothercare,
Orchestra, OVS Industry and Zara Kids.

Strategic recommendations surrounding

issues such as in-store services, range
diversification, multi-channel retail and
global expansion.

An assessment of the key opportunities

and threats impacting the sector,
including socio-demographic trends and
new forms of competition.
Children’s Childrenswear Young family
specialists specialists mainly fashion specialists’
offer toys, baby offer clothing, clothing offers cater
care products and footwear and for the whole
accessories, as accessories. These family. These
well as clothing. include: include:
These include:
Obaïbi Zara
Baby Butt
Mayoral H&M
Mothercare

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GLOBAL DEPARTMENT STORE RETAILING Scope of this report

Verdict’s report on GLOBAL DEPARTMENT STORE RETAILING is an investigation into Value of the department store sector in
North America, Europe, Japan, Latin
how department stores across the world are performing in the wake of the global
America, China, MEA and the rest of
financial crisis, offering strategic insight on the format's future growth opportunities.
Australasia, with forecasts to 2014.

Profiles of the top 12 retailers, including

This report provides comprehensive coverage of the global department store market with analysis segmented details of current and future strategies,
sales performance, store numbers and
into Europe, North America, Japan and the rest of the world. It provides regional market values,
other operating data to 2009.
product shares, insight into the main regional players and analysis of key market drivers and inhibitors. It
also provides comprehensive profiles of the top 12 global department store retailers. A dedicated chapter for each region,
which includes sales, store numbers and
space, as well as insight into the main
players and key regional sector trends.

COMPANY PROFILES

• Dillard’s • El Corte Inglés

• Isetan Mitsukoshi • JCPenney
• J Front Retailing • Kohl’s
• Marks & Spencer • Macy’s
• Sears • Nordstrom
• Sogo & Seibu • Takashimaya

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Verdict produces a range of reports analyzing the key issues affecting

retail sectors throughout Europe and the rest of the world

Our new strategic retail insight reports will soon cover global markets

Sectors, channels and locations Strategic retail insight NEW! Retail market entry

Global Department Store Retailing The Future of European Convenience Retailing Retailing in Russia: Long-term potential prevails
Global Luxury Retailing Internationalization Strategies of CEE retailers Retailing in Eastern Europe: Westwards expansion
Childrenswear in European Retail The Impact of the Credit Crunch on European Retail Retailing in Romania: Developing retail market
Value Clothing in European Retail Private Label in European Retail Retailing in Czech Republic: First phase complete
The Future of European Discounters Retailing in Poland: Non-food opportunities
European Shopping Centers Retailing in Slovakia: Continues to shine
European Grocery Retailing Retailing in the Baltic States: Prospects dampened
European Electricals Retailing Retailing in Bulgaria: Opportunities for growth
European DIY Retailing Retailing in Hungary: Retail expenditure squeezed
European Clothing Retailing Retailing in Spain: Improving situation
Global Airport Retailing Retailing in Italy: Tough market with opportunities
European Health & Beauty Retailing in France: Growing liberalization
Global Jewelry Retailing Retailing in Germany: Consolidation begins
European Furniture Retailing Retailing in Ireland: New space, new opportunities

For more information on our reports and future projects please contact us at enquiries@verdict.co.uk

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