More lending, tax reform prop up retail’s outlook

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(Source: Sunstar | December 30, 2017)

Cebu’s retail scene is likely to continue to enjoy strong sales in 2018 and infrastructure build-up will play a huge part in this anticipated rise in consumer spending.

“Infrastructure will drive retail activities in 2018,” said Robert Go, president of the Philippine Retailers’ Association-Cebu Chapter. “As more projects are being erected, more jobs will be generated, so people will have more money to spend.”

Growth in the country’s retail industry is consistently supported by the sustained growth of the business process management (BPM) industry and the continued inflow of remittances from overseas Filipino workers (OFW).

Under its Build, Build, Build program, the Duterte administration has projected it will spend P8 trillion to P9 trillion during its six-year term.

Go said this massive infrastructure program will not only drive spending but will also push more local retailers to expand to the countryside.

“We’ve seen more local players spreading their wealth in the countryside and this would mean busy business activities,” said Go, who owns the Prince Warehouse Club chain in the Visayas and Mindanao.

Warming ties with China will also help forge joint venture partnerships with local retail players. Go said this will open opportunities for entrepreneurs to expand their businesses to other key areas.

Besides the infrastructure build-up, the National Economic and Development Authority (Neda) 7 pointed out that increased spending activity may be expected next year with the implementation of the tax reform law.
President Rodrigo Duterte recently signed the first package of the Tax Reform for Acceleration and Inclusion (Train) bill into law. Train exempts workers earning P250,000 and below from paying personal income tax, and adjusts excise taxes on fuel and automobiles.

The tax exemption starts on Jan. 1, 2018.

‘Lending culture’

Coming from a healthy retail activity in 2016, which is an election spending year, Go described 2017 as a better year, because retail sales grew despite the challenges: a terror threat in Bohol that military and local authorities quickly contained, martial law in Mindanao, and the Marawi City crisis.

“The war in Marawi has ended. We now expect more rebuilding efforts. New jobs will be opened and normalcy in business activities can begin again,” said the PRA Cebu official.

Go said he also expects brick-and-mortar stores to continue to thrive even with the rising popularity of online shopping.

While they acknowledge the importance of embracing the digital space in retail operations, Go said the ecommerce adoption in the country still in its infancy.

“Going online may have threatened brick-and-mortar stores elsewhere but for Cebu, the market still prefers to visit the malls, and touch and feel the products before buying them,” said Go. Limited access to fast and reliable internet also discourages consumers from using mobile apps or buying online for now, he said.

High logistics costs within the country and doubts about the security and reliability of online payment schemes top the list of concerns among Filipino shoppers, Go noted.

He also shares the same outlook as to the roll-out of digital payment services being offered by telecommunications companies.

Go said while transforming into a cashless nation is a welcome development, most Filipinos are still locked in the “lending culture”.

“Digital payments will happen in the future, but not in the near term as majority of the Filipinos still prefer ‘pautang’ (buying on credit). A lot still want to own credit cards because they want to borrow,” said Go.

He noted that a change in Filipinos’ perception toward lending will make the cashless way of payment take off eventually. “This will happen but in the longer term,” said Go.

Asia recorded the biggest increase in ecommerce globally in 2017, with 44 percent growth, according to Kantar Worldpanel’s fourth annual “Future of E-commerce in FMCG (fast-moving consumer goods)” report.

E-commerce now contributes 36 percent of global FMCG growth, and the top six contributors to FMCG e-commerce growth are led by two Asian powerhouse economies: China and South Korea.

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