According to retail analyst IGD, the Philippines is one of the fastest-growing countries in Southeast Asia, with its GDP growth hitting 6.9% in the first quarter of 2016, and further strong expansion predicted on the back of robust domestic consumption, 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 the cutting of red tape.
From these factors, IGD projects that the grocery market, currently worth US$99bn, will see a 10% compound annual growth rate to reach US$157bn by 2020.
Similar to many developing countries, the Philippine grocery market is dominated by traditional trade. Modern retailing makes up around just 30%.
Yet the Philippines’ leading retailers have made extraordinary progress in transforming the country’s modern retail landscape. These have strong financial backing and entrepreneurial spirit, says Jenny Li, a senior retail analyst for IGD.
“SM Retail, Puregold and Robinsons Retail are the top three domestic players in the country. All of them are scaling up their footprints with significant store network expansion and consistent sales growth,” she said.
SM Retail, for instance, has opened 99 new stores in various formats in the past year; Puregold, with 305 stores across the country, has reported an impressive 20% increase in sales in the first quarter of 2016.
IGD’s latest report, “Philippines in Focus: Retail Landscape and Channel Outlook”, has identified a number of key trends driving the country’s retail channel development. Among others, building a diversified portfolio strategy has been successful for most leading retailers.
“Modern retailing in the Philippines started with hypermarkets and supermarkets; increasingly, however, retailers are embracing a multi-format strategy by building their presence in smaller formats and online channels,” said Li.
“This enables them to create differentiated offers to target a broader audience, with unique demographic profiles and different shopping needs. Furthermore, 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.”
A subsidiary of the pan-Asian retail giant Dairy Farm, Rustan’s Philippines is the leader in premium retailing and is well-established to target upscale shoppers. Over the past few years, the company has been developing Wellcome, which follows a neighbourhood supermarket format and combines daily staple products with competitive pricing.
Meanwhile, Rustan’s convenience store network, created via a joint-venture with FamilyMart, is gaining popularity among busy office workers.
“It’s clear that the Philippine retail market presents great opportunities for future growth,” said Li.
“If you are looking to invest in Asia, or seeking to expand into new markets, the Philippines is one region to consider.”
However, she warns that 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.
