THE recent Retail Real Estate World Summit left many impressions: the friendly face of Wal-Mart, the future economic titans, and what we can learn from the fascinating city of Istanbul.
Neil Fraser
May 3, 2005
PICKING up where I left off last week - we will get back to Joeys in my next column! The Retail Real Estate World Summit 2005 was held in Istanbul, Turkey, last week, at the Ciragan Palace Hotel.
The original structure was built over more than two decades, from 1850 to 1874, during the reign of Abdul Aziz. Built on the site of an older wooden palace, the Ciragan Palace is magnificently located on the European shore of the Bosporus. In fact, the sultan would have entered the palace directly from the Bosporus through ornate ceremonial gates.
Much of the palace was destroyed in 1910 by fire and it remained a shell until it was beautifully restored in 1990 as the Ciragan Palace Hotel Kempinksi. What a restoration, what a hotel! I didn't stay there but certainly wandered through its public rooms and, of course, attended the retail summit in its immaculately restored conference centre.
I touched on some of the presentations last week, namely those of Dr Bernard Kouchner (of Doctors Without Borders), AJ Jaganathan (of Dubai Mall), the panel I was on, and some general impressions of one or two other inputs.
But there were a number of other presentations that warrant mention - those by Anthony Stokan, H Lee Scott Jr and Radha Chadha in particular. I am not going to deal with Anthony Stokan's talk on "Consumer Complexes", other than to suggest that you look out for his about-to-be-published book, Naked Consumption. If it is anything like his presentation, it will offer a fascinating opinion on where retail is going.
Scott is the president and chief executive officer of the world's largest - and probably most controversial - retailer, Wal-Mart. Founded by Sam Walton in 1962 with a single shop in Arkansas, there are now 1 398 Wal-Mart Stores (each about 13 000 square metres in size), 1 585 Supercentres (each about 18 000 square metres), 539 Sam's Clubs and 72 Neighbourhood Markets. That is just in the USA.
Add to that 11 stores in Argentina, 144 in Brazil, 236 in Canada, 39 in China, 92 in South Korea, 633 in Mexico, 54 in Puerto Rico and 270 in the United Kingdom. In 2005 alone the company will add a further 5 million square metres of retail trading space to its property portfolio. Turnover last year was $280-billion - at just R6,00 to the dollar that equates to R1 680 000 000 000,00! By 2007 turnover is projected at one billion dollars a day! It made a profit of $10,3-billion in 2004 and employs about 1,6 million people, who are called associates.
The controversy around Wal-Mart is multi-faceted. If you want to know the particulars I recommend Bob Ortega's book In Sam We Trust. Ortega, an investigative reporter for the Wall Street Journal, spent five years investigating Wal-Mart and details how Wal-Mart's success raised troubling questions about the company's effect on communities and its treatment of workers - sorry, associates.
It looks into how activists waged impassioned campaigns to keep the colossus from invading towns and suburbs and threatening local businesses; how dozens of "mom 'n pop" and other local stores did not survive as a result of Wal-Mart's assault on their marketplaces; how its search for the lowest supply prices resulted in engaging suppliers in the Far East who turned out to be using child labour.
Today the company is the largest US importer of goods from China, at great cost to US manufacturers. But Ortega also gives credit to the remarkable success of the organisation, providing a fascinating but balanced insight into the workings of the behemoth.
At the retail summit we were not treated to such a balanced view by Scott, but he gave a fascinating one none-the-less! He presented us with the soft face of the company - respect for the individual; service to the customer; striving for excellence; the dedication of staff; the setting aside of 138 000 acres of environmentally friendly land to be added to by one further acre for every acre of trading space added over the next 10 years; changing the "big box" image to fit the needs of local communities; and so on. The punchline of his spin was, "We democratise merchandise!" Now I have heard it all!
The presentation by Chadha, the managing director of a strategy consulting firm operating out of Hong Kong, set out the retail opportunities offered by India and China. It was a real eye-opener for me.
The 2005 ranking of countries by gross domestic product - USA, Japan, Germany, India and Britain - will be turned on its head by 2050, reading China, USA, India, Japan and Brazil. She showed how, to a large extent this was because of the "power of youth". Currently 40 percent of Japan's population is younger than 35; in China this is 55 percent and in India it is 67 percent.
Income levels are rising rapidly, producing a massive middle class in each country. Across India and China about 1,5 billion people have been born since 1970. Before 1970 China was under the grip of communism and those born before that time only knew a harsh life and a conservative mindset. The one-child policy of pre-1970 gave way to a more open policy and real progress has led to a mindset that Chadha classified as, "To get rich is glorious".
She classified pre-1970 India as a place of "constant shortages and glorified simplicity". However, since 1970 the Indian worldview has become one of, "Money is the new religion".
In both countries a modern lifestyle has become the genre to be embraced. In China this has resulted in a rapid transition from traditional to organised retail and a mall-building frenzy. India, by contrast has just "come out of the starting blocks and been bitten by the 'mall bug'". In both nations the growth of retail will be unlike anything else we have ever seen. So they are two countries that offer huge opportunities.
Now, some last comments on Istanbul. It is a city of 14 million people with an incomparable setting straddling Asia and Europe and Christianity and the Muslim faith. It is a city with a unique history and heritage showcased in many magnificent buildings, incredible palaces and awe-inspiring mosques, all of which have their own particular stories.
Vibrant marketplaces offer anything and everything in Istanbul; it is a truly old city of much wealth, yet it is also a clean city full of friendly people. However, it is a city where everyone smokes, everywhere!
It is a city of dervishes (well, I saw one!) and belly dancers; a city with horrendous traffic congestion and even worse driving, yet a city where I never felt threatened. Istanbul is a city where ancient buildings rub shoulders with the most modern inner city shopping centres; it is a city of palpable authenticity, culture and values, of excellent tourist guides operating in a sophisticated system. In all, Istanbul is a city that offers great experiences, which is what a great city should do.
What we can learn from Istanbul is one, the residents' pride for their city; two, how they keep this massive city relatively clean; three, from the tourism industry; and four the retail - from marketplace to mall.
I hope you had a good long weekend.
Cheers, Neil
