SSI Group expands e-commerce presence
SSI Group Inc. launched its new e-commerce site on November 6, 2020 as part of its goal to boost digital retail. Trunc.ph features high-end brands such as Gucci, Saint Laurent, and Bottega Veneta and offers delivery within three to 15 days. SSI President Anton Huang said that the group aims to expand its digital sales contribution to 15% to 20% of total sales in the next three years. In 9M 2020, online sales of SSI grew by 300% and accounted for 5% of total sales. The group recorded a 50% decline in sales during the height of the quarantine period as its stores were temporarily closed from March 15 to May 2020. Currently, SSI has re-opened 99% of its stores nationwide with the rest scheduled to resume in November 2020.
In our view, the pandemic and strict lockdowns have accelerated Filipino consumers’ shift from brick-and-mortar to online shopping. As of the end of Q3 2020, vacancy of malls in Metro Manila reached 12.5% from 10% in Q1 2020 due to subdued consumer spending and foot traffic which led to the closure of selected retail establishments. Hence, we see vacancy rising to about 14% by the end of 2020, from only 9.8% in 2019. We recommend that retailers partner with delivery platforms and differentiate their offerings by proactively utilizing technological advantages such as scan-and-go technologies. Colliers also encourages retailers to maximize mobility maps and partner with app developers to determine consumer behavior during the pandemic. Moving forward, we see more mall operators implementing curbside pick-ups, personal shopper services and e-commerce marketplaces to capture the shift in Filipino consumers’ preferences.
Economy contracts by 11.5% in Q3
Data from the Philippine Statistics Authority (PSA) showed that the country’s GDP contracted by 11.5% in Q3 2020, slightly slower than the -16.9% in Q2 2020. The government projects GDP to contract between 4.5% to 6.6% in 2020. Household spending declined by 9.3% during the quarter together with the 14.7% contraction of exported goods and services. Acting Socioeconomic Planning Secretary Karl Kendrick Chua said that the smaller contraction in Q3 2020 is indicative of a slow recovery as he expects the economy to bounce back in 2021. University of Asia and the Pacific Senior Economist Cid Terosa also projects better performance in Q4 2020 due to the holiday season. On the other hand, ING Bank N.V. Manila Senior Economist Nicholas Antonio Mapa does not expect a quick recovery given the high unemployment. House Ways and Means Committee Chairman and Albay Rep. Jose Ma. Clemente Salceda believes that an expanded third round of the Social Amelioration Program in 2021 is needed to stimulate the economy.
In our opinion, the pandemic’s impact to the property sector has become more visible in Q3 2020. In the property sector, Colliers saw the pandemic and community quarantines resulting in project delays and slower pre-commitment and pre-selling of office and residential buildings. In 2020, Colliers sees office lease rates and condominium prices declining by 17% and 13%, respectively. The country’s economic managers, multilateral agencies, and credit rating firms project that the economy will likely contract between 3.4% to 9.5% in 2020. Despite the projected drop in rents and prices, Colliers believes that the economic growth of between 6% and 9% in 2021 should help lift the demand for offices and residential units after a slowdown in 2020.
Pandemic accelerated PH consumers’ shift from cash to digital payments
A study by Paypal showed that more Filipinos are now utilizing digital channels for their transactions as the pandemic limited physical mobility. Based on the 2020 Paypal Consumer Insights Survey, 87% of the 500 local respondents increased their usage of digital payments during the pandemic. About 49% of the respondents noted security as their highest consideration when choosing digital payment platforms. In addition, 99% said that they are more likely to use digital payments even after the pandemic. In terms of usage, 44% of Filipino consumers use digital payments for paying bills while 36% use them to buy groceries. A study by the National Economic Development Authority (NEDA) and World Bank showed that digital technologies such as e-commerce, online education, and telemedicine helped the economy cope with physical distancing and business continuity measures.
The gradual shift of retailers to e-commerce partially boosted the adoption of e-payments among consumers in the country. Data from GCash showed that transaction value for the first seven months of 2020 reached more than PHP100 billion (USD2.1 billion), nearly four times higher than the PHP28 billion (USD583.3 million) recorded in the same period of 2019. As retailers further tap the e-commerce market, we project an increase in demand for warehousing and distribution centers to cater to the needs of consumers. We recommend that mall operators with large vacancies explore converting vacant spaces to microwarehouses. Demand for these facilities may also be driven by existing tenants within malls that are expanding their e-commerce presence. Landlords of office buildings in Metro Manila with high vacancies should also consider renovating their vacant space to be utilized as front distribution hubs. These will likely attract retailers looking for warehouses near urban centers.