2014-01-03 12:55:08 - Fast Market Research recommends "Peru Retail Report Q1 2014" from Business Monitor International, now available
As a result of the Peruvian government's vigorous promotion of domestic and international investment, the Andean country has experienced a thriving economy with some of the highest GDP growths in the region in the last decade. Peru is the fourth largest Latin American country in terms of population; its rising incomes and a rapidly expanding middle class give it tremendous economic potential that is perceived by domestic and international investors as the best country to invest in South America.
Generally positive trends in underlying economic growth, an expanding population and a steady increase in real wages are key factors behind the forecast growth in Peru's household spending on the retail sector. A growing number of working women, easier access to consumer
credit, and exposure to foreign product information through the media are also likely to help the value of the retail segment increase by 55% in US$ terms between 2013 and 2018, from US$89bn to US$137bn. Peruvian per capita consumer spending is forecast to increase by 45% to 2018, compared with a regional growth average of 27%. This growth in private consumption has reflected the growing degree to which Peru's lower and middle classes are able to participate in the consumer economy, with changes in consumption patterns no longer limited to the well off.
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Peruvian authorities have been working towards sustained economic growth since the era of the Washington Consensus and the results have become apparent in the past few years. Increasing GDP per capita and an ever-expanding middle class suggest that the economic gap and purchasing power disparities among the national population are shrinking. The Peruvian population is projected to grow at an annual average rate of 1.2% over the next five years, while gross income per household is expected to grow at a notable average of 6.1% in the same period. The population is highly urbanized; rising cities such as Arequipa, Trujillo and Piura are acting as catalysts for a dynamic and competitive retail sector that presents great potential benefit to investors looking for new ventures.
The majority of Peru's population is young, active and entrepreneurial. Many young people are following trends from the developed world, breaking cultural traditions and leaving home at an early age to study and work. This early mobility has led to the creation of new households that consume more than older generation households. The young people sector of the population represents the driving force behind the strong domestic demand and the national GDP, which reached US$200bn in 2012 and is forecast to rise to US$319bn by 2018.
Foreign retail companies have invested significant sums in the retail sector of the Andean country. Peru ranks 12th in global market popularity for expansion among international retailers position and is also among the top 50 countries for most developed and expanding e-commerce markets in the world. Peru's geographical position holds an advantage as well. It is surrounded by other thriving economies, such as Brazil, Colombia, and Chile. Increased regional trade and integration offer great advantages to investors in the country. Rising international tourism to Peruvian ancient cities, its northern beaches and flourishing capital city, Lima, has spurred the luxury tourism sector, which constitutes growing potential in the retail sector.
* The city of Sullana is attracting interest since Intercorp Group entered its market with a new mall, Real Plaza. Falabella is following suit with the planned opening of Tottus in January and Sodimac in the first quarter of 2014.
* Gap, Brook Brothers and Banana Republic are scheduled to open in Lima's Larcomar before the end of the year.
* The luxury fashion subsector is slowly gaining force in Lima - Jockey Plaza shopping centre in Lima created a 'luxury boulevard', Larcomar has positioned itself as a 'high-lifestyle corner', and emerging MegaPlaza is increasing its share of luxury stores.
* MegaPlaza invested US$17mn in a 9,000sqm expansion of the Plaza Conquistadores mall, which will include many international brands entering the Peruvian market for the first time.
* Forus purchased SanMaree Group, operator of the Billabong, Element and Von Zipper brands in Peru, for US$4.55mn.
Key BMI forecasts:
* Household spending rose 5.39% in 2013 to reach US$89bn
* The largest focus of this spending is transport spending and food and non-alcoholic drinks spending, with US$16.6bn each in 2013
* The largest growth will be seen by recreation and culture followed by communications spending with 22,9% and 20.3% accordingly
* Household incomes rose by 0.9% in 2013 but will be followed by projected growth of 4.4% in 2014
* The US$10,000+ income bracket will increase by 11.7% in 2014
* Per capita income will be US$3,803 in 2014.
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