FEATURE
3RD QUARTER , 2016
The Philippines :
A rising star in Asian retailing By : Jenny Li
Backed by solid economic growth , rising income and strong domestic demand , the Philippines stands out as one of the most burgeoning retail markets in Asia . IGD ’ s Senior Retail Analyst , Jenny Li , visited Manila during the May 2016 presidential elections . Here she examines what is giving the country ’ s retail sector such a positive outlook .
Favourable social , political and economic conditions
The Philippines is one of the fastest growing countries in Southeast Asia , with its GDP growth hitting 6.9 % in Q1 2016 .
Expansion is predicted to remain strong , thanks to robust domestic consumption , backed by rapid urbanisation and rising wages . A young and increasingly skilled workforce also has a major part to play in the country ’ s growth .
The country ’ s newly elected president , Rodrigo Duterte , is expected to implement further economic reforms and provide a better business environment through investments in infrastructure and cutting of red tape .
All these factors allow us to project that the grocery market in the Philippines , currently worth US $ 99bn , will see a 10 % compound annual growth rate and reach US $ 157bn by 2020 .
Multichannel strategy is the winning formula
In IGD ’ s latest report “ Philippines in Focus : Retail Landscape and Channel Outlook ”, we ’ ve identified a number of key trends that are driving the country ’ s retail channel development . Among others , building a diversified portfolio is a notable growth strategy for most leading retailers .
Modern retailing in the Philippines started with hypermarkets and supermarkets , but increasingly retailers are embracing a multi-format strategy by building their presence in smaller formats and online channels . This enables them to create differentiated offers to target a broader audience , with unique demographic profiles and different shopping needs . Also , emerging channels such as convenience stores and e-commerce are growing faster and are best placed to capitalise on the higher margins of discretionary spend categories .
Exciting opportunities for modern retailers
Similar to many developing countries , the Philippine grocery market is dominated by traditional trade whilst modern retailing makes up around 30 %. Yet the Philippines ’ leading retailers , those with strong financial backing and entrepreneurial spirit , have made extraordinary progress in transforming the country ’ s modern retail landscape .
SM Retail , Puregold and Robinsons Retail are the top three domestic players in the country . All of them are scaling up their footprint with significant store network expansion and consistent sales growth . SM Retail , for instance , opened 99 new stores in various formats in the past year ; Puregold , another major retailer with 305 stores across the country , has reported an impressive 20 % increase in sales in the first quarter of 2016 .
Jenny Li
Jenny works in the Asia-Pacific team at IGD and is responsible for managing research programmes and tracking the latest industry trends in Asia . She regularly travels across the region , gaining market insight from visiting new stores and meeting local retailers and suppliers . Prior to working at IGD , Jenny had six years ’ experience working at market research and consulting firms , providing consumer insights to global businesses such as Nestle and HSBC , as well as advising government trade bodies on their emerging market strategies in Asia .
A subsidiary of the pan-Asian retail giant Dairy Farm , Rustan ’ s Philippines is the leader in premium retailing and it ’ s well established to target upscale shoppers . Over the past few years , the company has been developing Wellcome , a neighbourhood supermarket format combining daily staple products with competitive pricing . Meanwhile , its convenience store network , created via a joint venture with FamilyMart , is gaining popularity amongst busy office workers .
Further implications
It ’ s clear that the Philippine retail market presents great opportunities for future growth .
If you are looking to invest in Asia or seeking to expand to new markets , the Philippines is one region to consider . However , success lies in the ability to build a solid understanding of the local market and establish strategic partnerships with local players , as well as provide relevant and flexible solutions to support retailers ’ multichannel strategies .
For free content on global retail trends , visit igd . com / ra
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