(Source: Inside Retail Philippines | August 10, 2017)
The Philippines will soon be the Asia’s fifth largest retail grocery market, according to data released today.
Speaking on the first day of NRCE, the 24th National Retail Conference in the Philippines, today, IGD Asia-Pacific program director Shirley Zhu said the market will grow by an average of 9.3 per cent year-on-year between 2016 and 2021.
Grocery retail sales in the Philippines are set to amount to PHP7.08 trillion (US$149.99 billion) by 2021 from PHP4.53 trillion (US$95.98 billion) in 2016, the international grocery research organisation’s data concludes.
Zhu says the growth will be driven by a growing population, strong domestic consumption and a buoyant economy, lifting it from sixth to fifth, behind China, India, Japan and Indonesia.
“The Philippines is an exciting market to watch. Modern trade currently accounts for about 20 per cent of total grocery retail sales and is growing rapidly,” said Zhu.
“We expect to see fast growth in both the number of outlets and sales for modern grocery retailers.”
Domestic multi-format retailers dominate modern trade and have shown robust growth over the last five years, with SM Retail, Puregold and Robinsons the dominant grocery retailers in the country. SM Retail, for example, is focusing on expanding its mid-sized and small-format stores. In 2016, the retailer opened 144 stores, only one of which was a hypermarket, while 111 opened under the Alfamart minimarket fascia, through a joint venture with Indonesia-based PT Sumber Alfaria Trijaya. SM Retail continues to expand beyond Metro Manila; in 2016, 80 per cent of its store openings were outside this area. Meanwhile, Puregold and Robinsons share a similar ambition to expand further beyond the Luzon area with their multi-channel strategies. 7-Eleven, the fastest-growing retailer in the Philippines according to IGD data, is also expanding its stores into smaller towns across the nation.
“Driven by more disposable income and increasingly urbanised lifestyles, Filipino shoppers are demanding more convenience in their grocery shopping. As a result, convenience and online are the hottest channels in the market,” said Zhu.
“The number of c-stores in the country is set to increase as domestic retailers continue to drive this part of the market, bringing in more convenience banners to the country. One of the reasons that demand for convenience stores is so high is because of the rising number of business process outsourcing, or call centres, in the Philippines. These are centred mainly in urban areas, operate 24 hours a day and tend to employ young people with disposable income, who want to shop for their groceries as conveniently as possible.”
Zhu said online grocery shopping in the Philippines is still in its infancy, but many bricks and mortar retailers have already been experimenting with their own ecommerce solutions.
“Lazada, the leading ecommerce platform in Southeast Asia, has been operating in the Philippines since 2012 and now has 6 million users in the country. The ecommerce company reportedly plans to go into grocery in the next two years.”
Looking into the future, Zhu predicts there will be fewer ‘mom and pop’ stores – locally known as sari-sari stores – and there is no doubt that the convenience and online channels will be on a fast growth trajectory over the next few years.
“There is a wealth of opportunity for retailers and suppliers looking to grab a slice of the action in this rapidly evolving market.”