American consumers are spending less, and this presents a big hurdle for American retail stocks. But investors can still cash in on emerging markets over the next couple decades.

Big spenders.

The emergence of the middle class in so called BRIC countries (Brazil, Russia, India and China) is the most important demographic change of the 21st century.

According to McKinsey & Co.,
urban consumers in China will spend $2.3 trillion per year by 2025. And India – the world’s second most populous country – will grow from 5% of the world’s population to 40% over the next two decades.

If you’re looking to dabble in the emerging market retail sector and capture some of this unprecedented growth, here are 3 stock recommendations courtesy of SmartMoney.

3 Emerging Markets Retail Stock Picks

AVON (AVP).
With a market value of $12.2 billion, AVON is the world’s biggest direct seller of beauty products to women in over 100 countries. AVON derives more than 56% of its income from BRIC countries, with revenue growth of 24% in Brazil alone in 2008. The stock trades at 16 times its 2010 P/E, well below the 5 year average of 20.

American Movil (AMX).
Based in Mexico city, American Movil is Latin America’s largest mobile phone provider. The company has a $67 billion market cap and added 3.9 million subscribers Q1 of 2009. Besides being the dominant player in Mexico, American Movil is the 3rd largest provider in Brazil, with plenty of room to grow.

Shanda Interactive Entertainment (SNDA).
Shanda Interactive Entertainment offers online gaming to the Chinese populace. The number of Chinese Internet users has passed that of the U.S., and the companies profits increased 25% in Q1.

Risk.

While the above stocks and markets offer the opportunity for tremendous growth, there is a risk. Perhaps the biggest risk when investing in the BRIC countries, as with any emerging market, is the lack of transparency. For example, much analysis of China revolves around it’s impressive GDP growth of around 8% at a time when other countries are seeing negative growth. Part of China’s impressive apparent growth comes from the fact that the government includes stimulus spending by the government! This leads to an over inflated estimate and lack of any clear idea of what the real GDP may be.

photo by ** Maurice **

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