Retail in the Philippines has been showing great promise, with players encouraged by its high growth rate across various retail categories.
This is particularly true in luxury goods, with the Philippines set to be the fast-growing market in Southeast Asia for this sector, a 30 percent increase from 2021 to 2022.
In addition, retail e-commerce growth rates in the Philippines are set to surpass all other markets in the region. This retail success is driven primarily by increased supply chains and distribution, leading to greater accessibility to consumer products and services.
The Philippines expands retail access
For many players, expansion into the Philippines seems a daunting endeavour, with the rural nature of the country often weighing heavily on the minds of key decision-makers.
In the past, conglomerates relied on third party distributors that offered minimal reach into the country. Prior to this, several operators within distribution managed to leverage the strong opportunities offered by accessing Southeast Asia. This is still apparent, but to a lesser extent, as players wrestle for control over their channels.
However, expanded distribution, and an increase in modern retailing and e-commerce, has allowed them greater access to the country.
As such, corporations are analysing the country’s potential, with many hoping to gain first-mover advantage to outcompete their peers. This wider distribution, as well as improved supply chains by multinationals, has been key to increasing brand presence within the Philippines.
Affluence translates into higher consumer spending
While increased distribution has been a key factor in the retail success of the Philippines, a country’s Gross Domestic Product (GDP) and the disposable income levels of its citizens are metrics that players also use to assess the viability of the market.
For example, with a significant population residing overseas, many local consumers rely on cash remittances from relatives, and this adds to their purchasing power. Despite inflationary pressures affecting the peso’s buying power, the impact of this practice cannot be underestimated.
There is a concentration of wealth amongst a small group of individuals, but the per capital income level in the Philippines is set to increase at a significantly faster rate than the rest of Asia Pacific.
This has surpassed Euromonitor International’s Income and Expenditure forecast, highlighting that the country recovered to pre-pandemic levels in 2022. This translates into potential consumers with greater disposable incomes who are young and affluent.
As such, many luxury brands have chosen to focus on the Philippines to cater for this increasing target audience, with many of these consumers complementing international offerings with domestic ones.
The country’s luxury market is highly undeveloped. Despite the belief that its scope is limited, many players are rushing to tap into the demand through multi-concept stores and luxury flagships. For example, the new Ayala Malls offer luxury brands such as Dior, Patek Philippe, and Max Mara.
Equally, the proliferation of luxury marketing in recent years has translated into greater visibility of luxury brands, including exponential expansion in luxury storefronts with a reliance on the aspirational.
Beauty and personal care also offers opportunities in the Philippines
The existing price segments of mass, premium and prestige within beauty and personal care will be more applicable for marketers seeking to navigate the Philippines. As affluence increases in the country, premium and prestige brands will become increasingly important.
A growth opportunity for players
As shown, there are many growth opportunities in retail within the Philippines, particularly for beauty and personal care, and luxury goods.
Price segmentation is one strategy that players could consider, as they attempt to encourage consumers with lower discretionary spending power and those more aspirational goals, to purchase luxury goods.
Regardless, players need to take a renewed look at the Philippines, understanding that it is just as important a market in Southeast Asia as other countries in the region.