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Colliers Review

The new normal in Philippine retail

/ 04:06 AM September 19, 2020

Colliers believes that the COVID-19 pandemic and the lockdown are likely to redefine shopping experience in Metro Manila.

Even if the government fully relaxes the lockdown imposed throughout Metro Manila, subsequent personal distancing protocols likely to be implemented will reduce consumer traffic. This, in turn, is likely to result in a slower absorption of retail space all over Metro Manila.

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Colliers projects vacancy rising to 12 percent in 2020 from 9.8 percent in 2019. In our opinion, the reduced mobility, observance of physical distancing and aversion towards the use of physical currency present opportunities for mall operators and retailers as these are likely to form part of the new normal in Philippine retail.

For a consumption-driven economy like the Philippines, we are optimistic that mall operators and retailers may still tap pent-up demand. Stakeholders in the retail sector should be proactive especially with the projected rebound in economic output, recovery in overseas Filipino workers’ (OFW) remittances, and the potential impact of social amelioration programs on consumer demand.

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Online shopping to drive retail

By expanding online strategies and partnering with apps to facilitate seamless delivery, retailers should be able to offset any softer retail demand due to the COVID-19 pandemic.

Based on the results of a Colliers Philippines survey, women have a higher daily internet usage than men. Close to 60 percent of the female respondents spend seven hours or more online while only 45 percent of males allot the same amount of time. Respondents of the survey would usually allot around 3 to 3.5 hours daily on online shopping.

The survey also showed that the daily internet usage and time spent on online shopping increases with age. Those 51 years old and older spent more than 10 hours a day online, with online shopping reaching as much as half that. Younger respondents (21 to 30 years old) spent on average three to six hours a day online with two hours of that on online shopping alone.

This supports one of our recommendations that retailers should increasingly target older shoppers and senior citizens. There should be a seamless online shopping experience, from adding items to cart to checking out using credit cards.

Social media marketing to surge

Close to 80 percent of respondents encountered advertisements for products and goods online via social media. Retailers could take advantage of this by further strengthening their social media presence to expand the reach of their products.

Based on the results of our survey, among the most popular e-commerce platforms include Lazada, Shopee, Instagram, retailers’ online stores, Zalora, Facebook Marketplace, and Amazon.

Colliers believes that mall operators and retailers should strengthen their online presence by either utilizing existing e-commerce websites of their mall operators or setting up their own platforms to market their products.

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Recovery in retail demand

But while we see opportunities amid the uncertainties, the central bank-forecasted drop in economic output in 2020 is likely to drag down consumer confidence which may impact retail space absorption in Metro Manila.

This is likely to be compounded by the $3.0 billion to $6.0 billion (P153 billion to P306 billion) drop in OFW remittances and rise in unemployment projected by various government agencies and officials.

Remittances, for instance, fuel private consumption, which cover about 10 percent of the country’s economy.

There are several economic indicators that already point to some recovery. OFW remittances rose in June 2020, a reversal from three straight months of decline.

Meanwhile, unemployment rate is starting to ease from a record-high 17.7 percent in April. These factors should help restore Filipino consumers’ purchasing power and benefit retailers and mall operators.

Expanded partnerships with logistics firms

The social distancing measures have been compelling consumers to rely heavily on deliveries. Mall operators and retailers should consider firming up partnerships with delivery companies that have modern warehouses and efficient logistics systems to maximize their shift from brick-and-mortar to online selling.

The Colliers survey noted that more than half of the respondents that chose online shopping preferred e-commerce due to convenience.

Expand offline-to-online strategies

The survey conducted by Colliers Philippines shows tremendous opportunities for retailers that are agile enough to pivot to the “new normal” in Metro Manila retail.

The lockdown imposed to contain COVID-19 has forced malls to close, with only the stores supplying essential items such as groceries, medicines, and food for delivery open during stricter lockdowns.

Colliers believes that social distancing is likely be part of the new normal even if the lockdown is further eased. Hence, a significant number of physical retail shops are likely to remain closed for additional time.

However, brick-and-mortar retailers are trying to tap the demand by expanding their online presence.

Ramp up client engagement to stay top of mind

We recommend that retailers, especially higher-end brands, be more innovative to stay at the top of consumers’ minds. This may be in the form of home deliveries or personal shoppers.

Selected retailers and operators have started tapping alternative platforms to reach out to customers during the quarantine period. Several mall operators have launched their respective Viber communities. Ayala and SM have also launched their personal shopping services.

Highlight sanitation and marketing efforts

Mall operators should continue highlighting sanitation and property management procedures within their establishments. Developers should also line up marketing efforts to recapture pent up demand once the pandemic wanes and consumer confidence recovers.

Integrated features

At Colliers, we always recommend that developers highlight projects that are within integrated communities.

In our opinion, the pandemic has further emphasized the need to be in an integrated community where unit owners can easily access essential goods and services. Developers have been responding to this need by highlighting the presence of groceries and supermarkets that offer a wide array of merchandise, from F&B to basic house supplies to medicines.

We already see this in the market, with brands such as MerryMart offering an expansive line of merchandise. We encourage developers and retailers to continue highlighting the integrated features of their residential projects, including the presence of groceries and hypermarkets within the community, as this is likely to be among the major considerations of unit owners post-lockdown and COVID-19 pandemic.

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TAGS: Colliers Philippines, Philippine retail
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