Worst over for pinoy Retailers

PHILIPPINE retailers on Thursday declared that the “worst is over” for them since they expect moderate growth this year and a possible recovery next year, citing strong overseas Filipino workers’ (OFWs) remittances and growth in the business process out­sourcing (BPO) and tourism sectors.

At the sidelines of the 18th National Retail Conference, Jorge Mendiola, chairman of Philippine Retailers Association, said that the retail industry is expected to grow at a high single digit growth this year.

In 2008, the whole industry grew between 2 percent and 3 percent, Mendiola added.

The retail sector contributes an average of 12 percent to 15 percent to the country’s Gross Domestic Product (GDP) and is one of the country’s biggest employers. GDP is the total value of goods and services produced in a country in a year.

Frederick Go, the retailer conference overall chairman and president of Robinson Land Corp., said that the “worst is over” for the industry. “The industry was hard hit 18 months ago, but things are looking up. The industry would be doing quite well in the next 12 months.”

Mendiola and Go said that the growth would be driven by the strong remittances from Filipino migrant workers as well as growth in the business outsourcing and tourism sectors.

“These industries [outsourcing and tourism] have a lot room for growth and both are stable industries that have been contributing to the growth in the economy for the last few years, and we expect these factors to continue being the driver of the economy in the near future,” they added.

According to Mendiola, remittances from overseas Filipinos continued to flow, helping support consumer spending.

The Bangko Sentral ng Pilipinas (BSP) reported that remittances from overseas Filipinos for January to May reached $6.98 billion.

Opportunities from tourism

The passage of the Tourism Act of 2009, Mendiola said, also created fresh opportunities for retailers. “Tourism and retailing are closely allied and the Tourism Act will be a boon to both industries.”

The Department of Tourism earlier reported that tourist arrivals reached close to four million during the first semester of 2009 despite the global financial crisis and the swine flu scare.

Mendiola noted that consumers have also adjusted to the crisis.

“Consumers have begun to buy wisely, cautiously, most keen on value-for-money purchases,” he said.

Rowena Tomeldan, Ayala Malls Group’s vice president and deputy group head, said that most of the major retailers still experience moderate growth in traffic and sales despite the weak economic growth.

“Shopping continues to be part of the Filipino lifestyle and shoppers will continue to patronize your shops,” Tomeldan added.

She said that shoppers are still buying, but there have been shifts in their behavior, being more into comparative shopping and patronizing brands that have a solid track record.

Tomeldan added that much of the remittances from overseas Filipinos goes to consumer spending. “The opportunity lies in looking at market niches and segments that will buy and be loyal to your products.”

Growth seen

Go expects store sales in Robinson malls to grow by 8 percent this year.

“I think the worst is over. I think consumer confidence has recovered,” he said. “That is why we eagerly await 2010, when we, economists and experts forecast a recovery, hopeful that prospects will turn for the better.”

Mendiola, who also the senior vice president for operations of SM Shoemart Inc., expects his company to post double-digit growth in sales from opening of new malls nationwide.

Last year, he said, SM sales grew about 7 percent despite the first-half marginal growth.

For the whole industry, Mendiola said that sales are likely to grow double digit by 2010 as the economy is expected to recover.

Consumer confidence

Cayetano Paderanga Jr., an economist at the University of the Philippines, said that the domestic retail industry is backed by a strong consumerist society that is evident in the positive consumption pattern of Filipino households, heavily fueled by remittances from overseas Filipinos.

“Although it decelerated, PCI [personal consumption index] is still positive,” he added.

Paderanga said that indications from consumer loans data and overseas Filipino remittances showed signs that consumption will remain robust in the coming months.

He added GDP will grow by 1.4 percent this year under a pessimistic scenario from last year’s 3.8 percent.

Under a positive scenario, he expects GDP to grow by 1.8 percent this year. The government expects GDP to grow between 0.8 percent and 1.8 percent in 2009.

For next year, Paderanga expects GDP to grow between 1.2 percent and 2.2 percent.

The double-digit growth in consumer loans can translate to higher future spending, he said.

Paderanga added that the business outsourcing industry could boost consumer demand since it continues to strengthen its position in the local economy as an income generator.

He said that the combination of lower prices and higher disposable income is a strong motivation for consumer demand.

“Hence, the industry can do better in the coming months,” Paderanga added. He said that business outsourcing has been registering decreasing margins from 2000 based on data from national surveys.

To boosts retailers’ sales, Pa­deranga recommended that they focus on local consumers as they have more cash while facing lower prices. “Expand retail activities to places with high concentration of OFWs and BPOs as they open an optimistic window for retailers in the industry.”

Paderanga said innovation in cost and products are also important to survive the competition in the retail industry.

Boost from USS Washington

Perhaps one good bonus for the retail industry within the next few days is the visit of the aircraft carrier USS George Washington that is now docked on Manila Bay.

The four-day goodwill visit of the aircraft carrier, which started Tuesday, can result in the pumping of a hefty $9 million, or P432.3 million to the Philippine economy.

Sources said that each crew of United States Navy’s Seventh Fleet has an allowance of $1,500, or P72,075. The aircraft carrier has 6,000 crew.

During their stay in Manila, the US servicemen will use the port located at the SM Mall of Asia as their drop-off point. They will be ferried from the aircraft carrier by water taxis to the mall’s platform.

Jose Sio, SM Investment Corp., executive vice president and chief finance officer, said that the visit would surely benefit the cities within the mall’s areas, since the US servicemen are expected to spend all their allowances during their four-day visit.

Restaurant and entertainment establishments in Manila and Pasay City are also expected to be packed by US sailors in the coming days.

But the US Embassy said that the visit should highlight the strong historic, community and military ties between America and the Philippines.

The American servicemen were reminded by RP-US Visiting Forces Agreement executive director Edilberto Adan to avoid trouble during their stay in Manila.

The carrier’s crew conduct community projects throughout the Asia-Pacific region, including the Philippines, on a regular basis.

The troops are scheduled to facilitate some improvements at the Veteran’s Memorial Medical Center and conduct an outreach program in Payatas, both in Quezon City. –Darwin G. Amojelar, Senior Reporter with report from Chino S. Leyco, Manila Times