PHILIPPINE RETAILING
Feature
retailers in 2018 will continue to drive strong
growth to 2023, with SM and Puregold set
to retain their market-leading positions.
7-Eleven (Philippine Seven Corp) will see the
fastest growth of all the retailers, driven by
network expansion. Robinsons is set to retain
its third-place position after the acquisition
of Rustan’s Supercentres from Dairy Farm
in 2018, while Metro is forecast to maintain
strong growth via multi-format networks and
ongoing geographical expansion.
Large formats will continue to dominate the
market, accounting for 22.2% of the market
in 2023 – with the supermarket channel
establishing itself as the main generator
of sales and a market share of over 15.6%.
Convenience is the fastest-growing physical
store channel, driven by 7-Eleven and
Alfamart continuing to open new stores and
expand their footprints.
Online: slow but steady
With a CAGR of 8.9% over the next five
years, the Philippines is the fifth-fastest
growing grocery market in Asia, after
Bangladesh, India, Vietnam and Pakistan.
Jiong-Jiong Yu, Senior Retail Analyst at IGD
Asia, outlines the market’s growth forecasts
to 2023
By 2023, the grocery market in the
Philippines market will have increased by
53.3% in value, from 2,780 PHP bn in 2018 to
4,293 PHP bn in 2023, driven by a booming
population, strong domestic consumption
and a buoyant economy.
Traditional trade forms 75% of the grocery
market in the Philippines and we forecast by
2023 it will still dominate the market, with
a CAGR of 8%. However, we expect modern
trade to grow faster and by 2023 to have
increased its market share from 25% to 28%,
fuelled by retailer expansion both within
Metro Manila, as well as Visayas in the
central and Mindanao in the southern parts
of the archipelago.
Channel hopping
Supermarkets and convenience stores are
the two fastest-growing channels, driven by
SM Retail and 7-Eleven respectively, both
of whom are forecast to see double-digit
growth between now and 2023. The top
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Online grocery retailing has been slower to
take off in the Philippines compared to other
markets across South East Asia. However,
this channel will see the fastest growth over
the next few years; starting from an almost
non-existent base today, by 2023 the channel
could be contributing up to 0.6% of sales.
Many of the leading retailers including SM
Retail, Robinsons and Puregold have started
experimenting with online groceries in the
Philippines. A number of pureplay retailers,
both large and small, are also starting to
look at taking advantage of the opportunity.
The latest one to do so is Shopee, an
online shopping platform with presence
in Southeast Asia and Taiwan. In 2018, it
launched an online grocery shopping app in
the Philippines.
• SM Retail (WalterMart), Puregold and
Robinsons are the three major retailers that
have shown the strongest ambition to date
in online. All are experimenting with various
models, whether these be B2C or B2B
platforms or via third party services
• Alibaba is selling groceries online in the
Philippines via its Lazada marketplace.
The range is currently limited to dry and
packaged food. We expect Lazada will
expand the offer and extend its range over
the coming years
• Lots of online pureplay platforms are
emerging; for example, The Green Grocer,
which offers healthy and high-quality food,
Marketa.ph, where one can buy gourmet and
2ND QUARTER 2019
Column
2ND QUARTER 2019
PHILIPPINE RETAILING
artisan food items, and Real Food, a grocer
that offers organic food and customers pay
cash on delivery
• Third-party platforms such as Honestbee
and MetroMart are other solutions enabling
the expansion of online, by partnering with
retailers, including Robinson Supermarkets
and Puregold’s S&R wholesale, to deliver
products from multiple stores in one order
Evolve or be Extinct
Retail is a constantly evolving industry.
What does it mean for suppliers?
As one of the fastest-growing grocery
markets in South East Asia, the Philippines
presents great growth opportunities, but
these require the right level of investment
and attention.
Suppliers should consider partnering with
local retailers to tap into modern trade.
Although international convenience chains
are present in the market, they are almost all
operated under agreements with the major
Philippine-based retailers. Suppliers should
prioritise strategic relationships with the
country’s four leading retailers: SM Retail,
Puregold, Robinsons and Philippine Seven
Corp.
Finally, suppliers should also have robust
strategies in place for fast-growing channels.
Supermarkets and convenience are the two
fastest growing channels, mainly driven by
expansion, so having the right strategies in
place for these two formats is crucial. Online,
while growing quickly, will still take many
years to become a disruptive force in the
Philippines until the underlying infrastructure
is vastly improved – but it’s certainly one to
watch for the future.
ABOUT THE AUTHOR
Jion-Jiong provides
insight on retailer
strategies and industry
trends in China, South
Korea, the Philippines,
Taiwan and Bangladesh,
as well as leading
IGD’s innovation and
drugstore workstreams
in Asia. She has worked with both retailers
and manufacturers in the last 10 years on
shopper insight, growth strategy and category
management projects. Her background is in
management consulting, with experience in
qualitative and quantitative research gained at
GfK and dunnhumby.
Find more insights at IGD Asia: https://asia.igd.
com/about/free-content
MARKET
WATCH
DARREL WISBEY
www.darrellwisbey-retailadviser.com
Darrel Wisbey is a chief mentor and retail adviser who has 30
years of retail experience and has built a reputation for being
a leader who interprets the market accurately, define strategic
direction and deliver success by motivating, developing and
inspiring teams to achieve continual improvement
In striving for a competitive edge, retail is a constantly changing
environment. What works today becomes “old fashioned” tomorrow
as other retailers simply copy the latest concepts, retail formats and
operational improvements.
One element of retail that does not change is the demand by
owners and shareholders to deliver an acceptable profit. Retailers
are constantly under pressure to find new methods to achieve this
demand.
1. Mass Merchandising
Retail in the 60’s saw the arrival of the Mass Merchandising
Department Store, (MMDS). This concept adopted the supermarket
format with products available self-serve off display fixtures and
pay at supermarket style front of store POS registers. The format
attracted customers looking for value and this was responsible for
taking business away from the traditional Department Stores.
2. Building the “bottom-line”
With increased retail competition in the market, retailers had to look
internally to find ways to protect and improve their bottom-line profit.
Retailers used 3 key initiatives to protect and deliver net profit to
meet the demands of owners and shareholders:
a. Supplier contribution – retailers negotiated additional financial
contribution from Suppliers by way of:
i. Rebates – short and long – based on a %
financial contribution rebated against a sliding scale of the annual
purchase value and paid by quarter.
ii. Promotional Subsidy – for suppliers to gain exposure for their
products they contributed to the retailer’s promotion program.
b. Direct importing – to gain a market advantage retailer’s moved
into direct importing and bypassed importers. Direct imports when
controlled increased profit margins.
c. Operating Costs – with discipline and dedicated actions to reduce
and control “shrinkage”, (the loss of potential profit by way of theft
and administrative error), the savings delivered equal increase to
the bottom-line net profit.
Before listing significant retail changes for over the last four
decades, it is important to acknowledge what I refer to as the “The
three phases- “point of power”.
6. Fast Fashion
One of the most recent impacts was the arrival of the “fast
fashion” retailers. These players thrive on “new items” getting
onto the shelves more frequently than ever before to drive shopper
visitations.
7. Price reduction selling
In earlier years advertising was a date event driven activity e.g.
Mother’s Day, Christmas and Back to School or driven by seasonal
fashion releases for Winter and Summer but as time has passed and
the fight for market edge intensified the retailer has created more
and more promotional activity as the primary tool to drive customer
traffic. In supermarkets in Australia now it is usual to find the store
smothered every day in big discounts and product special offers.
Customers now resist paying full price and expect key items to be
discounted and if not, they simply shift their place of purchase to a
competitor.
8. Increase in customer will self-serve at POS.
The most recent
change in the world
of retail is the
expectation customers
will now complete
the point of sale
transaction as “self-
serve”. First delivery
of this function was
in supermarkets and
this has followed
quickly by the mass
merchants.
CONCLUSION:
Retail in the early 70’s was controlled by the suppliers and most
actions delivered in the retail store were heavily, (if not solely),
influenced, (some would say controlled), by the suppliers. Within that
decade retailers grew larger with more stores and rapidly growing
buying strength such that the retailer’s buying power was able to
wrestle control away from the suppliers. It was however the next shift
in power that had the greatest impact on retail behaviour and that
was the recognition that the true power is held by customers. Fail
your customers and your business will inevitably also fail.
What follows is a list of the most significant changes experienced in
the Australian retail market:
moved on into new countries and global expansion became the new
challenge.
Across many decades in retail experience shows that change is
inevitable. In the constant battle to win and keep customers in this
every increasing competitive market, failure to understand, embrace,
anticipate or create change will lead to your business demise.
Reactive retail management – “the retail followers” – whilst still
important has the danger of always being behind the success
achieved by the market leaders – “the retail creators” – and so as a
follower the big enemies are time and reputation.
3. The introduction of Technology
Technology entered the retail industry in the early 70’s and
has grown from a simple data
processing facility to today being
immersed as a critical function in all
facets of the business. Successful
retailers now make decisions in real
time and do so 24/7.
4. Online Retail
The entry of “on-line” shopping
gave the shopper a totally new
way in which to purchase products.
Initially there was doubt on the
acceptance of the format but
as is typical with technology the
acceptance growth has been both
fast, dynamic and is now .
5. Retail Expansion
As retailers realised own market
geographic expansion was almost
at saturation, they sought entry into
completely new regions and then
Time: change happens faster and faster being driven by the reality
of what is acceptable today is “out of date” tomorrow. Increased
time pressure can lead to misinterpreted understanding of how the
change benefits the retailer and what is required to successfully
execute it in your business.
Reputation: getting loyalty from your customers is a much tougher
achievement in retail today than ever before. Customers are retail
intelligent and more importantly demanding in what is required
to attract them to your stores. Being innovative is a valuable
differentiator that, in the eyes of the shopper, positions your
business ahead of competitors making your stores the preferred
destination.
CHALLENGE:
Are you a follower who relies upon reactionary behaviour to keep
up with your competitors or are you a creator who retains existing
customers and attracts new customers because you lead the
market?
Note: next issue will explore each of the above key retail changes in
the retail market and examine the impacts of each change on retail
success
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