THE retail sector in Cebu grew strongly this year on the back of renewed spending and rehabilitation efforts in earthquake and typhoon-stricken areas.
Philippine Retailers Association-Cebu chapter president Robert Go said there was an increase in spending in the first two quarters of the year as efforts were geared toward rehabilitating the areas damaged by super typhoon Yolanda and the 7.2 magnitude earthquake.
Cebu became the relief and supply hub for rebuilding efforts in Bohol, Tacloban and nearby provinces. The influx of tourists and relief workers to these areas also fueled retail spending.
“Retail in general is growing this year,” said Go. He noted renewed spending among consumers toward the last two quarters of the year.
Expansions
Mall, office and residential expansions also triggered growth in retail.
Ayala Center Cebu’s new wing, for example, opened doors to more local and international brands. The continued expansion of BPO offices as well as high-rise residential buildings and subdivisions also allowed retailers to expand operations, even in the countryside. Overseas remittances, which went up by 15 percent, also contributed to the growth.
Two new mall operators opened in Carcar while Go’s Prince Hypermart chain opened branches in Dalaguete, Daanbantayan and Argao.
The food sector grew the fastest due to rapid replenishment in devastated areas. Basic wear and home products also posted significant growth.
Retail player Melanie Ng described 2014 as a dynamic yet challenging year for local retailers.
Ng said there were a lot of opportunities in the year. However, there were also challenges such as high operational costs and a tougher competition with the entry of more global brands.
Add value
“Retailers during the year were compelled to add value to their products to emerge as a winner,” she said.
Sales in the IT sector grew substantially this year after consumers became more aware of the advantage of productivity and collaboration through devices.
“Laptop and personal computers would still continue to generate sales even with the presence of tablets because of these factors,” Ng said.
IT manufacturers, on the other hand, also introduced more advanced mobile gadgets this year, which triggered a drop in market prices and attracted high consumer spending.
Ng said consumers this year, especially entrepreneurs, have also realized the importance of cloud technology in their business operations.
“A lot of people now have started to invest in cloud-based technologies knowing how this can better transform business operations,” she said.
With this development, Ng urged telecommunications service providers to respond to the needs of the consumers by putting in place faster but cheaper Internet connectivity.
She said it will prompt more consumers to purchase more advanced gadgets and more people will sign up with technology-enabled tools.
Junrex Cellphones & Accessories Inc. chief executive officer Jun Yap agreed with Ng, saying that improving Internet connectivity will help local gadget retailers sell effectively their mobile products. It will also give consumers satisfaction, which would result in increased consumer spending, he said.
Promising year
“On top of competing on cheaper mobile and wifi packages, the telcos should also compete in terms of Internet speed and rate,” said Yap, who is also the past president of the Philippine Retailers Association-Cebu Chapter.
The year 2015 will be a more promising year for retail sector. “The sector will continue to grow since it’s also nearing election year,” said Go.
High spending is projected to continue next year on the back of the construction boom and infrastructure development, which are seen to further boost economic activities in Cebu. Retailers also expect the influx of Japanese investors as they are shying away from China. The tourism boom which would make the retail sector thrive.
Amid the opportunities in store for next year, Go hopes the port congestion issue in Manila will be resolved in 2015.
“Although there is increase in demand this year, the supply dwindled due to port congestion in Manila. There were manufacturers who ran out of raw materials to produce and had to cut down their manufacturing which resulted to limited stocks in shelves,” said Go.
Go noted port congestion problems may threaten price increase of basic commodities.
Local retailers are also advised to brace for a tougher competition in 2015.
Ng said the Asean integration which will happen next year will pave the way for the entry of more international brands in the market.
“Sure, spending will continue to increase, however, retailers would be more challenged to keep up with the changes in the market,” she said.
Ng said retailers are encouraged to exercise prudence in terms of operational efficiency to increase sales and become more profitable. They are also advised to hire well— recruit people who are skilled and customer-oriented - update product inventory and invest in latest technologies as these are just some of the things local retailers can do to compete well against international brands and stay relevant in the local market.
“Local retailers should expect more foreign brands to enter the market by 2015 especially that our country’s economy has since been recognized being one of the fastest growing in Asia,” said
Go. “It seems everbody wants to have presence here.”
Plans
The Department of Trade and Industry recently laid out plans for the retail industry to maximize opportunities and cushion the impact of the Asean integration. Part of the action plan for the retail sector is the holding of a massive information and education campaign on Asean Economic Community not only among retail players or business institutions but also among consumers. The plan also calls for an enabling law to regulate the high cost of displaying products in stores, as current cost is not conducive to small and medium enterprises (SME) retailers.
The technical working group headed by the DTI is also looking at creating a tripartite council that can address issues on high freight, logistics and operating costs. To ensure quality and to easily detect counterfeit items, the group also agreed that all products must have ICC and PS marks.
They also pledged to work on providing low interest rates and shorter processing time of loans, especially for SMEs.