The last two years have challenged the global economy as the COVID-19 pandemic triggered economic recessions after the varying levels of lockdowns restrict both regional and local economic activities. Data from the World Bank revealed that the global economy plummeted by 3.4% in 2020, a reversal from a growth of 2.6% in 2019 and worse than the recorded 1.3% decline in 2008, during the Great Recession era. Not even the major economies were spared from the crisis with contractions recorded in the United Kingdom and the United States at 9.8% and 3.5% in 2020, respectively.
The coronavirus impact in the Philippines halted its long-standing economic robustness with its imposition of one of the world’s longest and strictest lockdown period. The country’s Gross Domestic Product (GDP) year-on-year (YoY) growth entered the negative territory in Q1 2020, the steepest decline since Q4 1998, and it stayed there for five consecutive quarters before finally breaking out of the pandemic-induced recession in Q2 2021. For the full-year 2020, the economy contracted by 9.4% – the steepest in Asia – whilst the gradual easing of restrictions beginning in the latter part of 2020 helped boosted economic growth to 12% YoY and 7.1% YoY in Q2 2021 and Q3 2021, respectively.
As for the retail segment in the Philippines, more establishments had since been allowed to resume operations, as compared to the earlier periods of community quarantine when only the essential establishments had been allowed to operate. While seasonal conditions helped improved the average footfall levels in Q4 2021, the retail situation remains challenging as overall footfall in the major developments stays below half of the pre-pandemic level and as consumer spending remains tamed amidst the burgeoning unemployment rates. Overall, however, the prospects remain hopeful with the ramped-up level of the COVID-19 immunization rate.
The latest issue of Cushman & Wakefield’s How Global Brands Are Shaping the Metro Manila Retailer Landscape, a follow-up to our 2019 report, will examine how the ongoing pandemic has altered the international retailer landscape in the Philippines.
As the report probes how the global health crisis has reshaped the Metro Manila retailer landscape and the global brands that drive it, we seek to provide relevant information that will assist stakeholders to reimagine shopping and retailing in the aftermath of COVID-19.
Key highlights of the report:
1) The number of new foreign brands declines as the pandemic lingers
The difficult retail environment, along with the poor performance of parent companies globally, repressed the entry of new foreign retailers in Metro Manila. For the years 2019 and 2020, the number of new foreign retailers dropped to only 49 brands, 29% below the recorded 69 foreign brand entries from 2017 to 2018. Between January to November of 2021, only 10 foreign brands were added, bringing the total new international retailers in the past two years and 11 months to just 59 brands.
2) Foreign retailers with Food and Beverage (F&B) concept remain the fastest “comers and goers” in the local retail scene
While more than 80% of the observed closures of international retailers in the last 2 years and 11 months are those with Food and Beverage (F&B) concept, the segment continues to dominate the international retailer landscape as it composes 61% of the new brand entries between 2019 and 2020, as compared to 62% between 2017 and 2018. The other bulk of new brands is from the Clothing and Apparel segment which make up 16% of the total new retail types over the past two years.
3) Bulk on foreign retailers gravitate towards the Quezon City and Taguig City
New foreign brand entries were concentrated in the key shopping districts in the cities of Taguig (25%), Quezon (19%), Mandaluyong (17%), Pasay (14%), and Makati (12%). Among those that opened their first branch in Taguig City include The Coffee Academics, COS, and Jordan Manila, the latter of which occupies a massive 4,500 sq.m of retail space. Quezon City, which has the largest supply of existing retail space, attracted brands such as Pazzion, MOS Burger, and Tommy Hilfiger - The Watch Store. Mandaluyong City has become the location of choice to the first standalone store of Champion and the Swedish fashion brand Monki. In the SM Mall of Asia Complex in Pasay City, MCM opened its first Philippine store and the highly anticipated opening of IKEA happened in Q4 2021, while brands such Aesop and Sukiya opened in Makati City.
Quezon City and Taguig City are seen to continue to attract the bulk of international retailers in the future with the incessant shopping mall expansions in those areas, in addition to the increased business activities in their major business districts that fuel retail vibrancy.
Claro Cordero, Director and Head of Research, Consulting & Advisory Services at Cushman & Wakefield, said, “A couple of years back, online shopping plays in the background of brick-and-mortar stores as consumers in the Philippines give greater preference to traditional stores as they value the product experience that physical stores offer. The recent pandemic served as a trigger point for e-commerce to finally take off as it forced many non-essential retailers to temporarily close physical stores and as they take the pressure from reduced footfall when consumers stayed at home.
Also, while the majority in the retail industry are faced with a decline in sales, several have made gains and emerged as the big winners despite the pandemic. Aside from the strong growth in non-discretionary retail, sales in home improvements and home hobby interests such as pet shops and home garden stores also registered unanticipated growth.
Among the key trends that will make huge impacts in the Philippine retail scene are the rise of concept stores and the integration of both in-store and online presence as a way to weather the impacts of the health crisis and support retail sustainability moving forward.”
Mr. Cordero added, “The integration of both the brick-and-mortar stores and online channels will have longer-term implications in the Philippine retail market as the shift in consumer behavior is anticipated to persist. The resultant boom in e-commerce has driven the demand for warehousing, logistics and supply chain solutions. Some idle spaces in retail developments located in close proximity to high quality infrastructure have been converted for warehousing solutions to fulfill last mile delivery commitments due to the growth in e-commerce activity.”
“The Philippine retail scene is seen to evolve to be a hybrid of offline and online shopping with physical stores being complemented by online platforms. These factors, along with more relaxed regulations with the aim of making the country more attractive to foreign investment, should continue to drive the growth of foreign brands as they maintain a massive share of the Philippine retailer landscape”, Mr. Cordero further mentioned.
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