The retail sector in 2016 continued to contribute significantly to the local economy, amid strong domestic consumption. According to the Philippine Statistics Authority (PSA), household final consumption expenditure (HFCE) grew by 7.23 percent in the first three quarters of this year versus 6.2 percent growth in the same period in 2015.
Philippine Retailers’ Association (PRA) Cebu president Robert Go said he is confident that Cebu has grown faster than the national average, estimating growth in the local retail sector at nine percent. “The retail industry in Cebu this year is very positive. The people have jobs and they are spending,” he said. The PSA data revealed a growth of 7.2 percent in HFCE in the third quarter. Food and non-alcoholic beverages accounted for 41.5 percent of the total household expenditure.
This item increased by 8.4 percent compared with 5.3 percent growth recorded in the same period last year. Transport, the next top contributor of HFCE, grew by 12.7 percent, faster than the 11.2 percent growth in 2015. All other subsectors grew except for clothing and footwear, which had a negative 3.8 percent performance compared with 4.5 percent posted in 2015. Generally, the positive retail development is manifested in the growing number of malls, establishments, and convenience stores in Cebu, said Go.
Overseas Filipinos’ remittances and the revenues as well as jobs generated in the business process outsourcing (BPO) sector are primarily boosting consumer spending here. Data from Pinnacle Real Estate Consulting Services Inc., in its Cebu Market Report, also showed abundant retail spaces in Cebu. Currently, Metro Cebu has a footprint of 1.08 million square meters in commercial and retail spaces.
This represents 98 percent growth from the estimated 545,000 square meters of retail spaces in 2013. While the vacancy rate reached 12 percent in 2015 with the entry of the SM Seaside and Robinsons Galleria Cebu, vacancy dipped again to nine percent at present since the market is absorbing the increase in retail spaces. As national players invade the local market, homegrown players like the Gaisano families and Go’s Prince Retail are expanding in the provinces, which they consider as their new growth markets.
This year’s retail economy also saw a boost with the national elections. In addition, the Christmas season also spelled a more dynamic retail activity among locals. Looking forward to 2017, Go said he expects the retail sector will continue to experience growth. But there are risks next year to prepare for. First, the weakening of peso against the US dollar may spell higher inflation starting in the first quarter of 2017. Currently, the peso-dollar exchange rate plays at the 49-level, but Go hopes this will not go beyond the 50-mark. In the first 11 months of this year, inflation averaged at 1.7 percent.
The Bangko Sentral ng Pilipinas (BSP) targets an inflation rate of two to four percent in 2017. Second, the retail official also noted changes in the economic policy of the government. “If there is no sudden change in policy, we could still grow,” he said. What to watch out for For instance, the proposed increase in sin taxes may affect sales of alcohol and cigarette products. There is also a looming increase in value-added tax from 12 to 15 percent. In terms of labor, the anti-contractualization stance of the Duterte administration may affect the growth of micro and small retailers. He said that while bigger players may conveniently absorb their workers, the small players, who only have enough to sustain the business, will have to do the same.
The Department of Labor and Employment has identified malls, hotels and restaurants as workplaces where “endo” is prevalent. “Endo”, one of the top issues of the 2016 presidential campaign, refers to “end of contract” and the process of letting workers go before they become regular employees. Generally, however, the retail official expressed confidence for 2017. The optimistic outlook of international financial institutions for the Philippine economy supports Go’s projections for the retail industry.
The newest player to enter Cebu in April next year will be membership-based Landers Superstore, which will add 8,000 square meters of shopping space located at 23 Minore Park, the former grounds of St. John XXIII Seminary along Juan Luna Ave. in Cebu City. Landers Superstore marketing director Pinky Angudong sees a very exciting year ahead for the retail shopping sector in Cebu as they come in, promising wider choices for consumers.
Source: Sunstar | December 26, 2016
http://www.sunstar.com.ph/cebu/business/2016/12/27/good-strides-retail-516936
