Consistent growth in disposable income and consumer credit continues to increase the size of Peru’s middle class to levels where sales of cars, household appliances and furniture are registering record highs. According to the Lima Chamber of Commerce, 56.1% of the population counts itself among the top three income strata (out of six), up from 49.7% in 2004. Monthly income for the third strata averages PEN1420 ($535).

Moreover, as a result of Peru’s lengthening track record of economic prosperity, consumer confidence remains high. This is boosted by the low median age of the population, measured at 26, which bodes well for product categories in fashion, technology and home improvement. In 2012 the retail sector reported 6.7% year-on-year (y-o-y) growth, making it the second-largest contributor to GDP after construction, which rose by 15.2%. In November 2013 retail growth was reported at 5.9%, the highest rate in Latin America, and is forecast to reach 6.2% in 2015, according to a study released by the consultancy firm Latin Focus Consensus Forecast. Grant Harries, president of global brewing giant SABM iller’s Peruvian subsidiary Backus until November 2013 when he moved to Colombia, told OBG that his experience in the fast-moving consumer goods segment (FMCG) had seen business double since 2000. Higher FMCG sales were due to an increase in the customer base through expansion of the middle class and the higher purchasing power in general.

Shopping Habits

Retail growth brings along important socioeconomic advantages. As of December 2012, there were 503,949 workers employed in the formal commerce industry, including wholesale and retail, corresponding to 16.33% of the private sector labour force, according to the Ministry of Labour and Employment. While traditional outlets, such as markets and neighbourhood shops, will continue to account for the lion’s share of this figure, the rapid rise of modern retail is causing a shift in buying behaviour among the middle class. As formal retail is spreading into new territories, consumers are getting a taste of the allure of modern shopping malls and foreign designer brands. Even so there is much to do. Juan Fernando Correa, general manager of the retail chain Hipermercados Tottus, told OBG, “Peru is still far from having a developed retail sector like its regional neighbours. Whereas Chile has a retail density of 80 sq metres and the US has 600 sq metres per 1000 inhabitants, Peru only has 20 sq metres.”


The rapid development of the sector has meant a significant advantage for those retailers that had established a presence in the country in the early 2000s. High entry barriers, predominantly with regard to availability and acquisition of land, have afforded incumbents the opportunity to rapidly expand their presence across the country as well as their product offering. Therefore, just a few conglomerates have dominant stakes across various retail segments. The presence of Chilean retail chains, notably represented by Cencosud, Falabella and Ripley, spreads across all segments. After establishing a strong presence in Chile, these groups have used their financial strength and market knowledge to enter Peru’s retail scene before the arrival of other international competitors.

In recent years Peruvian companies, such as Interbank’s dedicated retail arms InRetail and Oechsle, have picked up their speed of investments and are winning market share. Despite entry barriers, newcomers are also on the rise, mostly large multinationals looking to secure multiple locations either through greenfield investments, partnerships with incumbents or takeovers. Walmart is among those considering entering the market in the coming years, according to Reuters.


Supermarket sales have risen considerably in recent years. Headline growth was recorded at PEN8.36bn ($3.1bn) in 2011, up 19.2% y-o-y. Sales increased around 133% between 2005 and 2011. According to a report by Scotiabank released in July 2013, supermarket sales could grow by 10% to reach PEN10bn ($3.8bn) in 2013. The segment is dominated by three players: Chile’s Cencosud; Peruvian firm Supermercados Peruanos; and the Chilean Tottus Hypermarket chain. Cencosud, which owns Wong and Metro, has 43.5% of market share with 73 supermarkets and 14 hypermarkets. Supermercados Peruanos is a subsidiary of InRetail and includes the brands Plaza Vea, Vivanda and Mass. It is the second-highest earner in the sector, with 33.3% of the market. The firm had opened 10 new supermarkets by November 2013 and was planning to open another two by the end of 2013. It reported revenues of PEN2.3bn ($866.2m) as of September 2013, amounting to 7.6% y-o-y growth. In October 2012 InRetail raised $400m after concluding an initial public offering on the Lima Stock Exchange to finance new supermarkets, pharmacies and malls. It also announced it had secured 39 new supermarket locations.

Tottus, which is part of the Chilean Falabella Group, accounts for 23.2% of market share. During the first nine months of 2013 the firm’s sales totalled $846m, which represents growth of 10.22% in that period, putting it at the top of the Falabella’s regional operations in Chile, Argentina and Colombia. As of November 2013 Tottus had 37 stores in Peru. “Despite the rapid growth of supermarkets, their market share in many essential products is still minimal. For instance, in drinks, the supermarket sector sells less than 5% of the total. The informal market is far larger,” Fernando Correa said.

Room To Grow

While each of the three dominant players has expanded rapidly, supermarket penetration still ranks low compared to the rest of the region. In Lima, penetration stood at around 32% in 2011 compared to an average of 80% in other Latin American capitals, while national penetration was 17%. According to an April 2013 report by consulting firm APOYO Consultoría, 21 years ago Peru had around 45 supermarkets nationwide, while by 2007 this figure had climbed to 101 and at the end of 2012 there were 206. New players are also expected to enter the market. Chilean-owned retail conglomerate SMU, which owns Unimarc, Maxibodega and Don Vitto stores, has announced plans for 75 new locations over the next four years, including a new price-discount brand.


The pharmacy segment is reporting rapid expansion. Since 2005 annual average growth rates have been just below 14%. From January to July 2013 the retail sales of pharmaceuticals, medicinal and cosmetics products in pharmacies and drugstores reached PEN184.5m ($69.5m), an increase of 6.6% y-o-y, according to a report released by the Ministry of Production. The sector’s high potential is demonstrated by the comparatively low per-capita spending on pharmaceutical products. According to 2011 data from BCP, a leading financial institution, Peru has the lowest per-capita spending in the region, averaging $29. Neighbouring Colombia averages $45 a year while Venezuela leads the region with $193. Incumbent retailers, such as Interbank’s Inkafarma, which accounts for 48% of the market, are expected to take the lead in the expansion. They face competition from Cencosud’s outlets Fasa, BTL and MiFarma, which hold 22% of the market share, and Boticas Arcangel, which took 14% of total revenues.

Mall Sales

Revenues from mall sales have increased significantly in recent years and even make headlines in the local media. According to the Association for Shopping Malls in Peru (Asociación de Centros Comerciales del Peru, ACCEP), since 2007 total sales have risen by 225%. In 2012 alone sales increased by almost 18%, reaching $5.2bn, while 2013 forecasts point to $6.3bn in sales, representing y-o-y growth of 14%.

The rise in sales is facilitated by rapid roll-out of investment plans in new shopping malls. For 2014 there are plans to build at least 12 new facilities with investments totalling $700m, according to ACCEP. While in 2008 there were 29 facilities, by 2012 there were a total of 52, and by the end of 2013 that number will increase to 59. According to statements made to the local media by Juan José Calle, president of ACCEP, “Peru will duplicate the number of malls that Chile has in a 5-to-10-year period, reaching around 140.”

Revenues are set to undergo further accelerated growth as developers are moving to turn available plots into modern shopping complexes, particularly in medium-sized cities where land availability and consumer appetite offer abundant opportunities. Of the seven new malls opening in 2013, only one is in Lima, the rest are in the provinces. According to an April 2013 report by APOYO Consultoría, there are 1.8 malls per 1m inhabitants. Modern Lima has the highest concentration of malls with 11.6 per 1m people, followed by Callao with 4.1, southern Lima with 3.4 and Lima centre with 2.6.

Anchoring Growth

Department stores have been a traditional driver behind modern retail. Their position in the market is being strengthened by the spread of shopping malls using department stores as anchors to draw in customers. Shopping malls’ low national penetration rates – at 12% in September 2012 – ensure that expansion remains a priority. Three players dominate the segment: Saga Falabella, part of the Chilean Falabella concern; Ripley, another Chilean company; and Oechsle, which belongs to Interbank. After opening two new units during the first nine months of 2013, Saga Falabella manages 20 locations and saw revenues rise by 11.4% y-o-y. In a clear statement of the company’s confidence in Peru’s economic prospects, it has announced plans to double its presence by 2015.

By the end of the second quarter of 2013 Ripley’s operations had recorded growth of 12.7% y-o-y. The firm’s ambitious plans for Peru include increasing its portfolio to 35 stores by 2015 compared to the existing 21 as of June 2013, as well as expansion of Chilean operations and penetration of the Colombian market.

Oechsle is Peru’s answer to the Chilean dominance in department stores. Having opened its first location in 2009, the company has expanded at a rapid pace in a bid to capitalise on the sector’s growth and win market share. As of November 2013 it operated 12 stores in Trujillo, Huancayo, Lima, Ica, Huánuco, Arequipa, Juliaca and Piura and has announced the opening of three more locations in December2013.

Newcomers have also expressed interest in the segment. Chile’s Cencosud has announced its intentions to open some 13-14 department stores by 2015. Its dedicated brand, Almacenes Paris, opened four stores in 2013, the first in March in the city of Arequipa, followed by stores in Lima, Cajamarca and Ica. In September 2013 the firm reported its expectations to close the year with sales of $40m, and expectations of sales increasing to $150m in 2014 and $250m by 2015.

The home improvement segment is capitalising on the growth in residential real estate purchases and rising disposable income. Maestro Home Centre, a Peruvian franchise of US-based Ace Hardware, has announced 12 locations, while Sodimac, part of the Falabella group, plans to expand its presence with 15 stores. The latter operates 18 locations, which reported y-o-y growth of 18.1% in the third quarter of 2013. Local firm Cassinelli specialises in porcelain and ceramic fixtures for kitchens and bathrooms and has eight locations throughout the country. Promart, wholly owned by Peruvian holding company Intercorp Retail, offers a variety of products at three stores in Lima, as well as in Trujillo, Chiclayo, Piura, Juliaca and Huánuco. Newcomers include Spanish Zara Home, which opened its first location in Lima’s Jockey Plaza in 2012.

Luxury Goods

One segment notably absent is that of luxury goods. While certain brands have a small presence, luxury fashion names such as Gucci and Prada have yet to arrive. Gonzalo Ansola, former president of ACCEP, attributes this primarily to the narrow audience these brands cater to and their high prices on the domestic market. “People that buy these brands typically spend their holidays abroad, so they have access to the same products for much lower prices in, for example, the US,” he told OBG. The entrance of such brands is also burdened by space constraints, as their requirements for high-end shopping facilities in line with those seen in the capitals of developed markets are not yet widely available. “These brands are looking primarily at Lima and Arequipa which, for the moment, are not prioritised by developers,” Ansola said.

Mall Development

With no signs of a weakening in consumer demand for goods or modern retail space, mall developers have stepped up their pace. According to Ansola, by the end of 2012, 76 shopping centres had opened to the public. By 2014 that number is expected to surpass 100. After an initial focus on large cities such as Lima and Arequipa, medium-sized cities rank highest on the developers’ radar, where comparatively cheaper land prices and solid consumer demand are offering investors abundant opportunities. Data from ACCEP shows that six out of the seven malls opening in 2013 are in cities not yet served by such facilities. The fastest development is recorded in cities in the north, such as Piura, Chiclayo and Trujillo, which are experiencing rapid economic growth. Projects have also been announced in other areas of the country, including in the Amazonian region in places such as Pucallpa, Tingo María and Iquitos, which had not previously been targeted due to their lack of infrastructure.

The concept of shopping in modern malls is catching on quickly. “It is important that developers approach a new region in a cautious manner, gradually allowing the consumer to explore and accept a shift in buying behaviour, but it is evident that there is ample room for traditional and modern concepts to co-exist,” Rafael Dasso, general manager of local shopping centre brand Real Plaza, told OBG. Besides tapping into new territory, regional expansion will allow developers to bring in suppliers of more international brands that typically look to roll out their products in outlets across the country concurrently. Although development activity remains led by the private sector, regional governments are taking an increasingly participatory stance. Public-private partnerships have been established in the cities of Moquegua and Huaraz. Under the arrangement, government-owned plots are leased for up to 40 years, during which time private investors develop the property. The model has proven successful as access to land is among the biggest challenges for investors.

Capital Development

Land speculation and low availability of well-located plots have slowed the pace of mall development in the capital. Even so, Lima is by no means saturated. ACCEP figures show that mall penetration stands at 30%, compared to 80% in neighbouring cities Santiago and São Paulo. Though at a lesser speed, new malls are still opening up in the capital. Real Plaza is working on three new projects in the city’s wealthy northern area, while Chilean investors Cencosud and Plaza have both announced projects in the other side of the city. The southern part of Lima, which is being upgraded and expanded, remains relatively unexplored and is set to lead the capital’s mall development in the medium to long run. “Developers have started buying up plots as far as 100 km outside the city,” said Ansola. Furthermore, land price increases are expected to hit a ceiling in the short to medium term. “Over the past four years we’ve seen prices increase eightfold. This is simply not sustainable and will have to flatten out sooner rather than later,” Dasso said. He added that this could be encouraged by the sale of government lands, which are generally competitively priced, pushing private landowners to review asking prices.


Growing modern retail space is increasingly attracting foreign brands either through direct investment or franchises. Food chains have traditionally taken the lead in this area of development. Foreign brands are dotting the main avenues of Peru’s bigger cities, as well as the food courts in shopping malls.

The clothing segment is catching on, too. After the successful entrance of names such as Zara, Gap and Banana Republic, the road for other clothing brands seems to have been paved. According to Ansola, brand names including Shasa, Victoria’s Secret, H&M, Bershka, Pull & Bear, Oysho, Stradivarius and Massimo Dutti feature among those looking to make their mark in the medium term. He added that the limited space available for a nationwide roll-out is a blessing in disguise as this will open the doors to Peruvian companies entering into franchise agreements.


With the industry’s growth fundamentals set to continue their upward trend in the coming years, retail should retain its high ranking in investment and contribution to national GDP. The sophistication of consumer loans, which have grown six-fold over the past decade, is also expected to help spur developments. Land availability in Peru’s biggest cities remains a challenge, as does infrastructure network needs in its more remote regions. If unaddressed, this could undermine developers’ interest in less urbanised areas. However, both rapid development and growing investor interest will likely ensure future infrastructure development and continued sector growth as Peruvians keep shopping.