The new normal for Philippine retail

The retail sector continues to be in a challenging environment brought about by COVID-19. One of the immediate impacts of the pandemic on the sector is the overall reduced spending, except for on essentials. There has also been lower footfall in malls and retail establishments beginning early March even before the announcement of the Enhanced Community Quarantine (ECQ). This has translated to the decline in sales for both mall operators and retailers, except for groceries and supermarkets. A survey by the Philippine Retailers Association conducted last March showed mall operators reporting a 10% drop in sales while fashion retailers registering a 20% decline during that period.             

We also saw some supply chain disruption from production drop offs due to manpower constraints, which affected imports for raw and finished products. This is reflective of the decline in imports by the Philippines in February 2020, which declined by 11.6% y-o-y to USD7.06 billion based on the Philippine Statistics Authority (PSA) latest data. These combined with tighter border controls within and outside the Philippines, contributed to the delays in the movement of items. Currently, some retailers are moving to the production of personal protective equipment in the interim.

In response, major mall operators have granted rent condonation to affected retailers while the government mandated the deferment of rental payments of micro, small, and medium enterprises.

We are also seeing more online shopping from households due to various factors such as the limitations on number of people allowed to leave their respective homes, safety concerns, long queues, and the unavailability of some products and items within the physical stores. According to the April report by We Are Social, around 23% of internet users in the Philippines are spending more time doing online shopping. Consequently, we are seeing more online stores and resellers, as well as the growth of neighborhood on-demand logistics and delivery services such as foodpanda, Grab, and Lalamove. However, the decline in the number of operating brick-and-mortar stores as well as inventory is becoming constrained.