‘Vibrant’ year for retail

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Saturday, December 28, 2013

DESPITE calamities in the last few months of the year, Cebu’s retail sector remained vibrant and is primed for another double-digit growth
this year, an official said.

Jun Yap, president of the Philippine Retailers’ Association (PRA)-Cebu, said the retail sector will probably end the year with 10 percent growth, adding that purchases of consumer goods and tech gadgets will drive robust sales.

He noted, though, that they were about to declare a banner year for the industry, given the strong performance of the sector in the first three quarters. But they revised targets from 15 percent growth to 10 percent growth due to the calamities that hit the Visayas region in the last quarter.

“We weren’t directly hit by the major calamities but we were in a way affected,” he said.

A 7.2 magnitude earthquake shook Bohol and Cebu last Oct. 15, followed less than a month later by super typhoon Yolanda, which damaged more than P36 billion worth of agricultural crops and infrastructure in several regions, and claimed more than 6,000 lives.

‘Slight’ setback

Yap said that despite its challenges, this year is still better than last year for the retail sector.

PRA Cebu Chairperson Melanie Ng assessed 2013 as a challenging year but she underscored that the twin calamities also opened opportunities for retailers.

“There was a slight setback on luxury purchases as buying power was redirected to relief efforts. Christmas-related spending was slightly delayed due to the calamities but, nevertheless, the retail sector remained vibrant amid these challenges,” said Ng.

Christmas spending picked up toward the third week of December, said Yap. Major malls in the city held a series of mid-night sales and slashed prices to attract more consumer spending.

Robert Go, owner of Prince Warehouse Club Inc., said the calamities also affected the retail sector “in a positive way” as various relief efforts resulted to an immediate surge of sales.

Hub for relief

He said Cebu becoming a hub for relief operations led to an increase in sales of, among others, food, hygiene products, cooking and housing items.

“Cebu sales shot up. Retail doubled in the days after the calamities,” said Go, who is also a former president of PRA-Cebu.

Production of processed meats, according to Felix Tiukinhoy, president of the Philippine Association of Meat Processors (Pampi), was at full capacity to meet market demand following the calamities. Retailers, he observed, were able to quickly replenish their goods in the supermarket.

Growth in the first three quarters was driven by positive performances in the construction, information technology (IT), real estate, migration and tourism services, said Go.

According to Ng, IT-related business was also one of those sub-sectors in retail that logged robust growth this year.

Yap, who owns Junrex Cellphones and Accessories, reinforced Ng’s assessment, saying that demand for tablets and smartphones has been growing as prices kept dropping.

Smartphone prices are pegged from P3,000 to P40,000.

‘Consistently high demand’

Starmobile, a new local player that produces Android phones and tablets, estimates that some 5.6 million smartphones with a total value of P57 billion will be sold this year. Last year, there were about 4.6 million smartphones sold, valued at P41 billion.

The firm said in a press statement that Metro Cebu remains “strongest in the Visayas”, with “consistently high demand” in the market for quality yet affordable mobile devices.

From five stores and kiosks in December 2012, the firm has expanded to 45 stores and kiosks. It now has a total of six concept stores, of which three outlets are located in Cebu.

Tablet penetration in the Philippines, on the other hand, increased from six percent in 2012 to 14 percent in 2013, according to the first quarter 2013 research conducted by Ericsson ConsumerLab in Southeast Asia and Oceania.

“There is a clear change in mobile data usage. Users now prefer instant messaging, social networking and video streaming,” said Afrizal Abdul Rahim, regional head for Ericsson ConsumerLab South East Asia & Oceania.

“Those players who were able to align their products and services with consumer requirements were the winners of this year,” added Ng.

But the continued flooding of international brands in the local market has remained a great challenge for the local retail players.

“Those who did not innovate or shift to better formats were driven off the market front,” said Go, adding that the continued influx of Chinese goods in the central business districts has also affected sales of the local players.

But what other local players do to survive competition, according to Yap, is that they franchise these international brands to strengthen their footing in the local market.

With the proliferation of online shopping and other buy-and-sell retail concepts, “enhanced customer service” is now the name of the game, said Ng.

She said aside from re-branding and re-launching products and services, consumers these days now look at customer service as a factor for product and service loyalty.

“Healthy relationships with customers are now a major factor in the total shopping experience,” said Ng, on top of product developments.

Retailers forecast a construction boom in 2014.

Yap said sales of the sector next year will be driven by the robust construction activities beginning in January, as various government agencies and private sector groups rehabilitate the calamity-stricken areas.

But Gordon Alan Joseph, president of the Cebu Business Club, warned that the upward trend in the economic activity due to the spike in consumer spending is only a short-term reaction to the catastrophes and not an indication of long-term growth.

Ng said retail players affected by the calamities will race to get back in the game.

“There would be a lot of re-assessment in the business; players will re-examine the foundation of their businesses to ensure they are all disaster-proof,” she said.

Ng added a lot of positive developments await Cebu next year, with the continuation of the Mactan airport terminal project and the acceleration of mall expansions.

Ayala Center Cebu recently opened its P2.9-billion four-level retail expansion, with an additional 36,500 square meters of gross leasable area.

Asked about the industry’s preparation for Asean 2015, Yap said retailers are slowly adopting various marketing initiatives and are now looking at Asean counterparts for possible joint ventures.

Asteria Caberte, Department of Trade and Industry (DTI) 7 director, said that although there are no special programs for the Asean 2015 integration, they have laid out programs aimed to make small and medium players more competitive, such as providing a business-friendly environment with better access to markets and capital.

Published in the Sun.Star Cebu newspaper on December 28, 2013.


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