Pinoys seen to still do online shopping post-Covid
Data from NielsenIQ show that online shopping in the Philippines increased by 325% in 2020. In addition, 67% of shoppers that previously purchased online plan on shopping online even after the removal of quarantine restrictions. The group believes that shoppers will likely transition to the brick-and-click behavior, wherein both traditional and online shopping formats will likely influence the final purchase. NielsenIQ highlighted five challenges that retailers need to overcome to maximize the potential trend. These include fragmentation of retail, re-examining the role of traditional stores, consumer attention, last mile fulfillment, and different perceptions on retail.
The COVID-19 pandemic has accelerated Filipino consumers’ use of e-commerce and other digital platforms. Data from the Department of Trade and Industry’s (DTI) e-commerce roadmap show that the industry accounted for about 3.4% of the country’s GDP in 2020, and they project this to rise further to 4.3% by 2021. In terms of e-commerce enterprises, DTI sees this number increasing to 750,000 in 2021 from only 500,000 in 2020. Meanwhile, central bank Governor Benjamin Diokno also projects the share of digital payments to total retail transactions to account for 50% by the end of 2023 from only 10% in 2018. Colliers encourages retailers to differentiate using technological advantages by partnering with app developers and maximizing mobility maps to gauge consumer behavior during the pandemic. We also recommend retailers to implement scan-and-go technologies where consumers are able to use their smartphones to scan and pay products to minimize physical contact and improve shopping convenience.
Visitor arrivals continue to plunge
Data from the Department of Tourism (DOT) show that foreign arrivals for the first two months of the year declined to 17,422, plunging close to 99% from the 1.25 million recorded in the same period last year. DOT Undersecretary Benito Bengzon attributed the drop in arrivals to the travel restrictions imposed by the government to contain the spread of the COVID-19 virus. This has resulted in the tourism department shifting its focus on domestic travel to jumpstart recovery efforts.
Data from Colliers Philippines show that hotel occupancies across Metro Manila reached 20% in 2020 from 72% in 2019 due to disappointing foreign arrivals and subdued local demand. Meanwhile, the DOT has accredited 15 four and five-star hotels that can operate as leisure-based hotels. However, we do not see this having a significant impact on hotel occupancies as Filipinos still limit their spending on essential goods and services. Given the slow demand due to the pandemic, Colliers encourages hotel operators to consider converting some of their hotel rooms into private office and flexible workspaces. Among the amenities which they can offer are free Wi-Fi connectivity, cleaning services, and office supplies. In our view, the demand for these facilities is likely to rise given that more firms are implementing alternative schemes such as remote working.
Malls shut non-essential shops in stricter lockdown
Data from the Bangko Sentral ng Pilipinas (BSP) or central bank show that Overseas Filipino Worker (OFW) remittances reached USD29.9 billion (PHP1.43 trillion) in 2020, down 0.8% from USD30.1 billion (PHP1.44 trillion) in 2019. The figure is better compared to the 2% contraction initially forecasted by the central bank. December 2020 cash remittances declined by 0.4% to USD2.89 billion (PHP138.7 billion) from USD2.9 billion (PHP139.2 billion) in the same period of 2019. Central bank Governor Benjamin Diokno said that 2020 remittances accounted for 9.2% of the country’s GDP, slightly lower than the 9.3% share posted in 2019. Meanwhile, the drop in remittances in 2020 was also the first decline since 2000, which was brought about by the Asian Financial Crisis.
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Colliers saw retail vacancy rising to 12.5% in Q3 2020 from 9.8% in Q1 2020 due to lower consumer demand and subdued foot traffic across malls in Metro Manila. Due to the impact of the pandemic, Colliers has observed that some retailers involved in food and beverage (F&B), clothing and footwear and luxury goods have fully ceased operations. In 2021, we see vacancy increasing further as consumers still limit their spending on essential retail such as F&B, groceries, medicines and other healthcare needs. Colliers recommends that mall operators constantly monitor spending patterns of households and how they allocate their incomes. During the pandemic, data from the Philippine Statistics Authority (PSA) show that food and non-alcoholic beverages posted a 5% growth in 2020, while clothing and footwear plunged by 15.6%. In our view, these changes in consumer preferences should be factored into the retail mixes of upcoming malls in the capital region.