how global brands are shaping the metro manila retailer landscape

HOW GLOBAL
BRANDS ARE SHAPING
THE METRO MANILA
RETAILER LANDSCAPE
A Cushman & Wakefield Research Publication
MARCH 2015
GLOBAL
RETAILERS IN
METRO MANILA
1.0 MILLION
HOW GLOBAL
BRANDS ARE
SHAPING THE
METRO MANILA
RETAILER
LANDSCAPE
BPO industry on
track to employ more
than 1.0 MILLION
EMPLOYEES
S&P (BBB) and MOODY’S (BAA2)
updgrade the country’s investment
grade credit ratings
This report offers a snapshot of the
current international retailer landscape
within Metro Manila. Additionally, the
report identifies emerging retailer trends
and provides an outlook for the market
moving forward. The report tracked 190
mid-range and luxury foreign brands that
entered the Philippines between 2008 and
2014. The international retailers identified
in the report include new foreign brands in
the market and existing brands that have
set up their first dedicated stores in the
country.
FITCH, MOODY’S
and S&P award
Philippines with
investment grade
credit rating
START of three
year 6-7% GDP
growth rate
9.0 MAGNITUDE
EARTHQUAKE &
TSUNAMI in Japan and
flooding in Thailand,
Philippine economy
slowed to 3.6%
OF REMITTANCES
reach USD 20 billion
PHILIPPINE
ECONOMY
rebounded,
posted 7.6%
growth
2009
GLOBAL
FINANCIAL
CRISIS, Philippines
managed to post
1.1% GDP growth
in 2009
2014
2011
2012
2013
THIRD WAVE OF NEW
FOREIGN RETAILERS
Baskin Robbins, Casadei,
Carven, Crate & Barrel,
H&M, H&M Home,
Hamleys, Pottery Barn
SM MEGA FASHION
HALL opens in
Mandaluyong City,
brings total shopping
mall space in SM
Megamall to more
than 450,000 sqm
GLORIETTA
1 & 2 completes
redevelopment
in Makati City
(54,000 sqm)
SECOND WAVE OF NEW FOREIGN RETAILERS
A mix of luxury and mid-range retailers such as BCBG Max
Azria, Clinique, Cotton On, Repetto, TWG Tea Salon and
Boutique, Tory Burch, UNIQLO, J.Co Donuts,Vince Camuto
open their respective stores in Metro Manila
JAMBA JUICE enters the market
while new retailer entrants
expand their footprint
2010
FIRST WAVE OF
NEW FOREIGN RETAILERS
Mid range brands such as BonChon,
Forever 21, Happy Lemon, Muji, Papa John’s,
and Payless Shoe Source enter the market
HIGH-END AND LUXURY BRANDS such as Agatha,
Royce, Tumi, Hermes, Jimmy Choo and Massimo Dutti
open their first boutique stores in the country
2008
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1917, it has 248 offices in 58 countries, employing more than 16,000 professionals. It offers a complete range of services
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structured finance, corporate finance and investment banking, appraisal, consulting, corporate services, and property,
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CUSHMAN & WAKEFIELD
3
GLOBAL
RETAILERS IN
METRO MANILA
WHY THE PHILIPPINES?
The number of global brands in the Philippines has been rising, with more than 190 new
international brands entering the country since 2008. The last three years saw a significant
number of new foreign retailers in the market and 2014 served as the banner year with at
least 45 new brands having entered the country. The young and growing demographics
accompanied by rising income levels and a healthy stock of retail space offering competitive
rents, altogether underpin this strong retailer interest in the country.
STRONG ECONOMIC GROWTH
The Philippines has become one of the bright spots in the Asia Pacific region, posting an
average gross domestic product (GDP) growth rate of 6.7% in the last three years. The
services sector continue to post solid grow alongside a recovering manufacturing sector
while share of household consumption from the country’s GDP continue to hover from
69-72% in the last six years. This robust economic growth has caught the attention of
international retailers as they seek new markets outside the recovering economies of the
west.
900,000
people are employed
in the BPO sector
1.8 million
Despite the lower-than-expected 2014 GDP growth, the Philippines remain in a strong
economic position moving forward. An expanding middle class, supported by the sustained
growth of the business process outsourcing (BPO) industry and overseas Filipino (OF)
remittances is driving healthy consumption, which should maintain the country’s
attractiveness towards foreign retailers.
8,000,000
9.0%
7,000,000
8.0%
160,000,000
6,000,000
7.0%
140,000,000
6.0%
5,000,000
5.0%
4,000,000
4.0%
3,000,000
3.0%
2,000,000
FIGURE 2. PROJECTED POPULATION GROWTH BY MAJOR AGE GROUP
Growth rate
new foreign brands
entering the country
since 2008.
FIGURE 1. REAL GDP, CONSUMPTION AND GDP GROWTH
Php millions
190+
2.0%
1,000,000
1.0%
0.0%
2008 2009 2010 2011 2012 2013 2014
Real GDP
Household Consumption
GDP Growth
Source: Philippine Statistics Authority (PSA)
HEALTHY DOMESTIC CONSUMPTION LED BY THE YOUNG AND
GROWING DEMOGRAPHICS
The Philippine population grew annually by 1.9% from 2000 to 2010 and breached the 100
million mark last July 2014. An estimated 47 million of the country’s population belongs to
the 20-64 year old age group, of which 71% is between 20 and 44 years old, suggesting a
young and growing population. Assuming a decline in unemployment rate, the Philippines
should enjoy economic gains from the growing working age population1, which is projected
to account for 68% of the total population by 2045 according to the Philippine Statistics
Authority (PSA).
4
the number of Filipinos
deployed overseas
as of 2013
120,000,000
100,000,000
80,000,000
60,000,000
40,000,000
20,000,000
2010 2015 2020 2025 2030 2035 2040 2045
0-14
15-64
65 and above
Source: PSA, Cushman & Wakefield Research
The BPO industry and overseas remittances have been pivotal in expanding the country’s
middle class2 as both sectors are key drivers of employment, rising income levels and in
fuelling domestic consumption. As of end-2013, the number of deployed overseas Filipinos
and BPO employees are at 1.8 million and 900,000 individuals, respectively. Modest job
requirements3 and attractive compensation packages have attracted a large number of the
young and skilled workforce to enter the BPO industry. Similarly, higher wages4 and strong
demand for the Filipino workforce globally have encouraged the diaspora of a significant
number of Filipinos abroad.
“
Modest job
requirements
and attractive
compensation
package have
attracted a large
number of the young
and skilled workforce
to enter the BPO
industry. Similarly,
higher wages and
strong demand
for the Filipino
workforce globally
have encouraged
the diaspora of a
significant number of
Filipinos abroad.
”
CUSHMAN & WAKEFIELD
5
GLOBAL
RETAILERS IN
METRO MANILA
METRO MANILA HISTORICAL SHOPPING MALL STOCK
Shopping Mall Stock (in sqm)
8,000,000
Metro Manila shopping
mall stock currently
stands at 6.5 million sqm
7,000,000
6,000,000
5,000,000
4,000,000
3,000,000
2,000,000
1,000,000
0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Existing Supply
New Supply
Source: Cushman & Wakefield Research
MOST EXPENSIVE RETAIL LOCATION IN EACH COUNTRY
RANK 2014
HISTORICAL PERFORMANCE OF BPO AND REMITTANCE
280
Index (2008 = 100)
260
240
220
200
180
160
140
120
100
2008
2009
2010
2011
2012
OF Remittances
OF Workforce
BPO Revenue
BPO Workforce
2013
Sources: IT & Business Process Association Philippines (IBPAP), Philippine Overseas Employment Administration
(POEA), Cushman & Wakefield Research
This increased wealth and rapid pace of urbanization have generated demand for a wider
set of products and services, consequently, fuelling consumption. This robust consumption
has encouraged the construction of shopping malls by major and boutique mall developers
throughout the country.
HEALTHY RETAIL STOCK AND COMPETITIVE RENTS
Metro Manila shopping mall stock5 currently stands at 6.5 million square meters and could
expand to 7.0 million square meters by 2017 as new shopping malls complete within
upcoming mixed-use districts in the metropolis. Aside from the healthy pipeline, the
Philippines also has one of the most competitive retail rents across the globe. Our 2014
Main Streets Across the World publication ranked the Philippines in 62nd place6 in terms of
most expensive retail locations in the world. This competitive rent provides additional
incentive for prospective retailers to enter the market.
6
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27
28
29
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31
32
33
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46
47
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49
50
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54
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64
65
COUNTRY
USA
Hong Kong (China)
France
UK
Australia
Italy
Japan
South Korea
Switzerland
Russia
Austria
Germany
China
Spain
Colombia
Singapore
Norway
The Netherlands
Brazil
Turkey
Malaysia
Ireland
Canada
New Zealand
Denmark
Taiwan
Czech Republic
United Arab Emirates
Greece
Israel
India
Finland
Ukraine
Vietnam
Belgium
Sweden
Lebanon
Luxembourg
Kazakhstan
Hungary
Portugal
Argentina
Thailand
Poland
Serbia
South Africa
Qatar
Peru
Channel Islands
Mexico
Lithuania
Indonesia
Bahrain
Ecuador
Slovakia
Slovenia
Romania
Oman
Latvia
Bulgaria
Republic of Macedonia
Philippines
Estonia
Jordan
Cyprus
CITIES
New York
Hong Kong
Paris
London
Sydney
Milan
Tokyo
Seoul
Zurich
Moscow
Vienna
Munich
Beijing
Barcelona
Bogota
Singapore
Oslo
Amsterdam
São Paulo
Istanbul
Kuala Lumpur
Dublin
Toronto
Auckland
Copenhagen
Taipei
Prague
Dubai
Athens
Tel Aviv
New Delhi
Helsinki
Kiev
Hanoi
Brussels
Stockholm
Beirut
Luxembourg
Almaty
Budapest
Lisbon
Buenos Aires
Bangkok
Warsaw
Belgrade
Cape Town
Doha
Lima
St Helier
Mexico City
Vilnius
Jakarta
Manama
Quito
Bratislava
Ljubljana
Bucharest
Muscat
Riga
Sofia
Skopje
Manila
Tallinn
Amman
Nicosia
LOCATION
Upper 5th Avenue
Causeway Bay
Avenue des Champs Elysées
New Bond Street
Pitt Street Mall
Via Montenapoleone
Ginza
Myeongdong
Bahnhofstrasse
Stoleshnikov
Kohlmarkt
Kaufingerstraße
Wangfujing
Portal de l'Angel
Shopping Centre
Orchard Road
Karl Johans Gate
Kalverstraat
Iguatemi Shopping
Bagdat Caddesi (Asian side) and Istiklal Street
Pavilion KL
Grafton Street
Bloor Street
CBD
Strøget
ZhongXiao E. Road
Na Prikope/Wenceslas Square
Prime Shopping Centre
Ermou
Ramat Aviv
Khan Market
City Centre
Kreschatik Street
Shopping Centre
Rue Neuve
Biblioteksgatan
ABC Centre Achrafieh
Grand Rue
Prime Shopping Centre
Váci utca
Chiado
Florida
Central Retail District
ul. Nowy Swiat
Kneza Mihaila
V&A Waterfront
Prime Shopping Centre
Shopping Centre
King Street
Masaryk Avenue
Prime Shopping Centre
Prime Shopping Centre
Prime City Centre Shopping Centre
Av Naciones Unidas (Shopping Centre)
Prime Shopping Centre
Čopova
Bulevardul Magheru
Prime Shopping Centre
Prime Shopping Centre
Vitosha Blvd
Prime Shopping Centre
Makati CBD
Prime Shopping Centre
City Centre (BCD)
Makarios Avenue
EUROS/SQ.M/YEAR
29,822
23,307
13,255
10,361
8,658
8,500
8,120
7,942
7,456
4,749
4,440
4,380
4,100
3,240
3,135
3,087
3,081
2,900
2,714
2,660
2,649
2,529
2,478
2,443
2,384
2,361
2,220
2,204
2,160
2,105
2,070
1,968
1,900
1,805
1,750
1,636
1,583
1,500
1,330
1,140
1,110
1,064
1,025
1,020
1,020
1,009
965
950
879
874
864
791
756
665
660
660
600
543
540
528
480
402
360
317
216
US$/SQFT/YEAR
3,500
2,735
1,556
1,216
1,016
998
953
932
875
557
521
514
481
380
368
362
362
340
319
312
311
297
291
287
280
277.13
261
259
253
247
243
230.96
223
212
205
192
186
176
156
134
130
125
120
120
120
118
113
111
103
103
101
93
89
78
77
77
70
64
63
62
56
47
42
37
25
“
Our 2014 Main
Streets Across the
World publication
ranked the
Philippines in 62nd
place in terms of
most expensive
retail locations
in the world. This
competitive rent
provides additional
incentive for
prospective retailers
to enter the market.
”
CUSHMAN & WAKEFIELD
7
GLOBAL
RETAILERS IN
METRO MANILA
SALIENT SECTIONS OF THE RETAIL TRADE LIBERALIZATION ACT OF 2000
(1) “Retail trade” shall mean any act, occupation or calling of habitually selling
direct to the general public merchandise, commodities or good for consumption,
but the restriction of this law shall not apply to the following:
(a) Sales by manufacturer, processor, laborer, or worker, to the general public
the products manufactured, processed or products by him if his capital does not
exceed one hundred thousand pesos (Php100,000.00);
(b) Sales by a farmer or agriculturist selling the products of his farm;
DEFINITION
(c) Sales in restaurant operations by a hotel owner or inn-keeper irrespective of
the amount capital: provided, that the restaurant is incidental to the hotel business;
and
(d) Sales which are limited only to products manufactured, processed or assembled
by a manufactured, processed or assembled by a manufacturer though a single
outlet, irrespective of capitalization.
(2) “High-end or luxury goods” shall refer to goods which are not necessary
for life maintenance and whose demand is generated in large part by the higher
income groups. Luxury goods shall include, but are not limited to products such
as; jewelry, branded or designer clothing and footwear, wearing apparel, leisure and
sporting goods, electronics and other personal effects.
Foreign-owned partnerships, associations and corporation formed and organized
under the laws of the Philippines may, upon registration with the Securities and
Exchange Commission (SEC) and the Department of Trade and Industry (DTI), or
in case of foreign owned single proprietorships, with the DTI, Engage or invest in
the retail trade business, subject to the following categories.
CATEGORY A – Enterprises with paid-up capital of the equivalent in Philippine
Peso of less than two million five hundred thousand US dollars (US$2,500,000.00)
shall be reserved exclusively for Filipino citizens and corporations wholly owned
by Filipino citizens.
FOREIGN EQUITY
PARTICIPATION
MODE OF ENTRY
CATEGORY C – Enterprises with a paid-up capital of the equivalent in Philippine
Pesos of seven million five hundred thousand US dollars (US$7,500,000.00), or
more may be wholly owned by foreigners: Provided, however, That in no case shall
the investments for establishing a store in vestments for establishing a store in
Categories B and C be less than the equivalent in Philippine pesos of eight hundred
thirty thousand US dollars (US$830,000.00).
Historically, foreign retailers partner with local distributors such as Stores Specialists, Inc.,
SM Group, Robinsons Retail, and Bench (Suyen) Corporation, among others, in their foray
into the Philippine market. This allows these international retailers to leverage on the
reputable track record, local expertise, and network, of these local distributors.
Another mode of entry for prospective international retailers is through setting up a wholly
owned entity in the country. The Retail Trade Liberalization Act of 2000 allows foreign
retailers to own 100% of their enterprise in the country under certain conditions. The bill
seeks to open the local retail market to the global market. Among those that entered the
country wholly owned include, Giordano, Nike, and more recently, H&M.
There has been movement to amend the existing law, particularly the restrictions on
foreign participation, to enhance the appeal of the local market towards prospective
retailers. If successful, we may see further growth in new international retailers in the
country.
DISTRIBUTOR
BENCH (SUYEN) CORPORATION
BRAND GATEWAY
PRIMER GROUP OF COMPANIES
SELECT NEW BRANDS
Casadei, St. Marc Café
LUXASIA
Philosophy, Makeup Forever, Shisheido
SM GROUP
STORES SPECIALISTS, INC.
Miss Selfridge, River Island
Crate & Barrel, Forever21, Sfera, Suiteblanco, UNIQLO
Aeropostale, Brooks Brothers, F&F, Muji, Old Navy
Source: Cushman & Wakefield Research
8
FOREIGN INVESTORS
ACQUIRING SHARES OF
STOCK OF LOCAL RETAILERS
Foreign investors acquiring shares from existing retail stores whether or not
publicly listed whose net worth is in the excess of the peso equivalent of two
million five hundred thousand US dollars (US$2,500,000.00) may purchase only up
to a maximum of sixty percent (60%) of the equity thereof within the first two (2)
years from the effectivity of this Act and thereafter, they may acquire the remaining
percentage consistent with the allowable foreign participation as herein provided.
PUBLIC OFFERING OF SHARES
OF STOCK
All retail trade enterprises under Categories B and C in which foreign ownership
exceeds eighty percent (80%) of equity shall offer a minimum of thirty percent
(30%) of their equity to the public through any stock exchange in the Philippine
within eight (8) years from their start of operations.
No foreign retailer shall be allowed to engage in retail trade in the Philippine
unless all the following qualifications are met:
(a) A minimum of two hundred million US dollar (US$200,000,000.00) net worth
in its parent corporation for Categories B and C, and fifty million US dollar
(US$50,000,000.00) net worth in its parent corporation for category D;
QUALIFICATION OF FOREIGN
RETAILERS
(b) (5) retailing branches or franchises in operation anywhere around the word
unless such retailer has at least one (1) store capitalized at a minimum of twentyfive million US dollars (US$25,000,000.00);
(c) Five (5)-year track record in retailing; and
DC, Flight 001, Fox, Quiksilver, Roxy
Patek Philippe, IWC, Panerai, Hublot, Rolex, Omega, Tudor
ROBINSONS RETAIL
CATEGORY D – Enterprises specializing in high-end or luxury products with a
paid-up capital of the equivalent in Philippine Pesos of two hundred fifty thousand
US dollars (US$250,000.00) per store may be wholly owned by foreigners.
Luminox, Orca, Paul & Shark, Piquadro, Rudy Project
LUCERNE
CATEGORY B – Enterprises with a minimum paid-up capital of the equivalent in
Philippine Pesos of two million five hundred thousand US dollar (US$2,500,000.00)
but less than Seven million five hundred thousand US dollars (US$7,500,000.00)
may be wholly owned by foreigners except for the first two (2) years after the
effectivity of this Act wherein foreign participation shall be limited to not more
than sixty percent (60%) of total equity.
(d) Only nationals from, or juridical entities formed or incorporated in Countries
which allow the entry of Filipino retailers shall be allowed to engage in retail trade
in the Philippines.
PROHIBITED ACTIVITIES
OF QUALIFIED FOREIGN
RETAILERS
“
There has been
movement to amend
the existing law,
particularly the
restrictions on foreign
participation, to
enhance the appeal
of the local market
towards prospective
retailers.
”
Qualified foreign retailers shall not be allowed to engage in certain retailing
activities outside their accredited stores through the use of mobile or rolling
stores or carts, the use of sales representatives, door-to-door selling, restaurants
and sari-sari stores and such other similar retailing activities: Provided, that a
detailed list of prohibited activities shall hereafter be formulated by the DTI
Source: The LawPhil Project
CUSHMAN & WAKEFIELD
9
GLOBAL
RETAILERS IN
METRO MANILA
NUMBER OF BRANDS BY RETAIL TYPE (2008-2014)
BRAND COUNT
DISTRIBUTION OF NEW
FOREIGN BRANDS BY
REGION
34.2%
Food &
Beverage
33.7%
Clothing &
Apparel
8.4%
8.4%
Footwear
4.2%
Jewelry, Watches
& Accessories
Furniture &
Fixture
NEW GLOBAL RETAILERS IN METRO MANILA
MID-RANGE FOOD & BEVERAGE AND CLOTHING BRANDS
LEAD NEW RETAILERS
Solid consumption driven largely by the country’s expanding middle class has contributed
to the growth of mid-range retailers. The segment currently captures around 79% of new
foreign brands in the report.
Mid-range food and clothing retailers have exhibited the largest growth in the last seven
years. Fast fashion brands such as Forever 21, CottonOn, and UNIQLO continue to take up
large retail spaces, while quick service F&B restaurants/stores such as BonChon, Happy
Lemon, and J. Co. Donuts, albeit taking up smaller spaces, are active in store expansions.
The entry and expansion of new and existing brands contributed to the uptick in retail
activity within the luxury and high-end segment. New designer labels such as Hermes,
Stuart Weitzman and Casadei have entered the Philippines while select existing brands
opened their first dedicated stores in the country. High-end watches Hublot, Baume &
Mercier, Breitling, Tudor, IWC, and Jaeger-LeCoultre simultaneously opened their first
stand-alone stores in Central Square in Bonifacio Global City last 2013. In addition,
cosmetics brands Benefit and Clinique opened their first dedicated stores in 2011 and
2012, respectively. Select existing brands also opened their new flagship stores in recently
completed shopping malls within Metro Manila. However, these stores remain small and
store expansions have been few and far in between compared to other countries.
10
3.2%
3.2%
Bag &
Luggage
Gadgets &
Appliance
2.6%
General
Retail
2.1%
Healthcare
& Beauty
40%
29%
25%
5%
1%
EUROPE
ASIA
NORTH
AMERICA
AUSTRALIA
MIDDLE
EAST
STORE COUNT
DISTRIBUTION OF NEW
FOREIGN BRANDS BY
REGION
EUROPEAN BRANDS CONTINUE TO DOMINATE THE MARKET
BUT ASIA PACIFIC RETAILERS GAINING MOMENTUM
An estimated 123 new brands covered in the report are western retailers. European brands,
particularly from France, Italy and UK, led retail activity from the region. Alexander
McQueen, H&M, Burton Menswear London, Stefanel, and Uno de 50 are some of the new
European brands that took up spaces in shopping malls in Metro Manila.
Nevertheless, American retailers continue to have healthy presence in the country given the
historical ties and cultural affinity between the United States and the Philippines. Select new
American brands in the country are Aeropostale, American Eagle Outfitters, Jamba Juice,
Joe’s Jeans, Old Navy, Papa John’s and Payless ShoeSource.
The market is slowly changing as the number of Asian brands has significantly increased in
the last three years. Asian retailers currently account for around 56 new brands in the
country, translating to approximately 261 stores in Metro Manila alone, and outperforming
North American (158 stores) and European (157 stores) brands. The high store count of
Asian brands is due to the large number of F&B retailers from the region. Japan leads all
Asian retailers with at least 22 new brands entering the market since 2008. Select Japanese
brands in the country include Muji, Royce, Sony, St. Marc Café, and UNIQLO.
42%
25%
25%
6%
2%
EUROPE
ASIA
NORTH
AMERICA
AUSTRALIA
MIDDLE
EAST
Source: Cushman & Wakefield Research
Australian and Middle Eastern retailers also have a growing presence in the country.
CottonOn, F&X, Patchi, Rubi and TYPO, albeit having small market presence, have had
healthy store expansions.
CUSHMAN & WAKEFIELD
11
GLOBAL
RETAILERS IN
METRO MANILA
NEW RETAILERS CONCENTRATED IN SELECT CITIES
The cities of Makati, Mandaluyong and Quezon host around 60% of the total number of
stores by new global retailers tracked in the report. This is mainly due to the volume of
new shopping mall space in these cities, which provide opportunities for entry and
expansion by international brands. At least 106 flagship stores have opened within
Mandaluyong, Taguig and Makati, which suggest the strong preference by international
retailers to locate within these areas. Examples of flagship stores in these cities include, in
Makati, Bershka, Stradivarius, INGLOT, and Jimmy Choo; in Mandaluyong, Carven, Crate &
Barrel, Forever 21, H&M, and Herve Leger; and in Taguig, Casadei, Ever New, Hamley’s, Jamba
Juice, Joseph, and Pottery Barn.
The low store count of international brands within the cities of San Juan, Las Piñas, Marikina,
Parañaque and Pasig is attributable to the lack of new shopping mall space and close
proximity of these areas to other cities with strong presence of foreign brands.
Luxury brands have the highest store count in Mandaluyong and Makati where the Ortigas
and Makati central business districts (CBDs), respectively, are located. BPO and corporate
firms, as well as middle- and high-income subdivisions in the locality of these CBDs serve as
strong catchments for luxury goods. As of this writing, new luxury and high-end brands
tracked in the report have little presence in Quezon City and Muntinlupa.
12
HISTORICAL GROWTH OF NEW
FOREIGN BRANDS BY SEGMENT
NUMBER OF NEW FOREIGN BRANDS
BY SEGMENT AND BY RETAIL TYPE
200
180
160
140
120
100
Number of New International Brands
Number of New International Brands
The low number of upscale brands in
Quezon City is reflective of the predominance of middle-income households
surrounding shopping malls within the city.
This should enhance the appeal of the city
towards mid-range retailers and suggest
potential growth for prospective luxury
and high-end brands.
The low number of upscale brands in Quezon City is reflective of the pre-dominance of
middle-income households surrounding shopping malls within the city. This should enhance
the appeal of the city towards mid-range retailers and suggest potential growth for
prospective luxury and high-end brands. Meanwhile, the weak interest of new upscale
retailers to locate within Muntinlupa may stem from the limited prospective market in the
area compared to the more diverse and wider catchments of Makati, Mandaluyong and
Taguig.
80
60
40
20
0
2008
2009
2010
Low-end and Mid-end
Source: Cushman & Wakefield Research
2011
2012
2013
Luxury and High-end
70
60
50
40
30
20
10
0
2014
Luxury and High-end
Low-end and Mid-end
Source: Cushman & Wakefield Research
CUSHMAN & WAKEFIELD
13
GLOBAL
RETAILERS IN
METRO MANILA
country. Meanwhile, ramen chains, which include Hanamaruken, Ikkoryu Fukuoka Ramen,
Ramen Nagi, Ramen Santouka and Tampopo, have become very popular in the past two
years.
INCREASING SEGMENTATION IN THE MARKET
New retailers are offering new price points, highlighting the increasing segmentation in the
market and reflective of the growing purchasing power of the consumer base. Select new
fast fashion brands such as Bershka, G-Star Raw, Miss Selfridge, River Island, Stradivarius and
Vero Moda have higher price ranges than existing clothing and apparel brands. There is also
an increasing presence of more affordable upscale brands such as Brooks Brothers, BCBG
Max Azria, Paul & Shark, Karen Millen, and Vince Camuto, to name a few.
RETAILERS RECOGNIZING MARKETS OUTSIDE METRO MANILA
SUSTAINED DEMAND AND RENEWED INTEREST FROM NEW AND
EXISTING RETAILERS
There remains keen interest from international retailers to enter and expand their
footprint in the country. This is evident in the sustained healthy partnerships between local
distributors and foreign brands. Robinsons Retail announced last year that it is bringing in
Costa Coffee, a UK coffee chain, to the Philippines. Moreover, majority of committed spaces
within newly completed shopping malls are by foreign brands. In addition, international
retailers are replacing older tenants in select existing shopping malls.
There is also renewed interest from current and formerly existing brands in the country.
Japanese restaurant Nanbantei of Tokyo and clothing brand Eddie Bauer have opened up
their expansion stores after more than five years being in the country. Ice cream store
Baskin Robbins re-entered the market in 2014, setting up shop within Central Square
building in Bonifacio Global City (BGC).
EXPANDING RETAIL SELECTION, NEW PRODUCT LINES AND GROWING
NICHE MARKETS
Retail selection in the country is expanding with the entry of home furniture and fixture
brands such as Crate & Barrel, H&M Home and Pottery Barn in 2014. West Elm is likewise
opening its first store in Estancia Mall in Pasig City. Prior to the entry of these brands,
foreign furniture and fixture products were distributed by select local stores such as
Dimensione and Make Room & More. The growth of these retailer brands may be
attributed to the unprecedented boom of the residential market. This is evident in the large
number of new residential projects in both the mid-end and luxury segment throughout the
country.
New brands and product lines catering to the underserved market for men and children
are likewise growing. Among such are Brooks Brothers, Paul & Shark, CottonOn Kids,
Pottery Barn Kids, Petit Bateau, and Rubi shoes. Pottery Barn Teens is opening in Estancia
Mall in Pasig City within the year.There are also an increasing number of niche retailers,
particularly for F&B brands. International milk tea and yogurt brands continue to proliferate
despite the large number of existing local and international players in the market. Japanese
specialty restaurants such as Saboten, Katsu Sora and Tonkatsu by Terazawa, which focuses
on katsu, and more recently, Osaka Ohsho, specializing in gyoza, have opened stores in the
14
RISE OF E-COMMERCE
There is a young e-commerce market in the country with major online stores such as
Lazada and Zalora growing in popularity among Filipinos. Major distributors have also been
quick to adapt. Bench and Stores Specialists, Inc. have launched their respective online
stores to cater to their young and tech-savvy consumers.
Nonetheless, majority of Filipinos still prefer the traditional brick and mortar stores. This is
evident in the evolution of malls from purely shopping places into lifestyle destinations,
combining entertainment and leisure components to increase footfall and enhance the
shopping experience of its consumers. There also remains relatively low penetration of
smart phones and internet in the country. A 2014 Nielsen study reported that smart
phones and internet users had market penetration of 15% and 52%, respectively. Nielsen
also noted in 2012 that only 34% of Filipinos made online purchases, far lower than in Asia
Pacific (62%) and across the globe (49%). This may change as access to reliable internet
connection improves combined with rising incomes and falling prices of smartphones.
“
Nonetheless, majority
of Filipinos still prefer
the traditional brick
and mortar stores.
This is evident in
the evolution of
malls from purely
shopping places into
lifestyle destinations,
combining
entertainment and
leisure components.
”
HISTORICAL GROWTH OF NEW BRANDS BY RETAIL TYPE
Number of New International
Brands
MARKET TRENDS
Property development and economic activity, albeit still concentrated in Metro Manila, have
been gradually moving into provincial areas. Major developers are constructing new
townships in various growth cities such as Cebu, Davao and Cagayan de Oro, among others,
creating expansion opportunities for international retailers. Select brands such as Ellesse,
F&F, Liu Jo, and Petit Bateau have opted to open their first stores in these areas instead of
Metro Manila. The availability of affordable retail space and presence of underserved
markets provide strong incentive for international retailers to enter these cities.
60
40
20
0
2008 2009 2010 2011 2012 2013 2014
Bag and Luggage
Clothing and Apparel
F&B
Footwear
Furniture and Fixture
Gadgets and Appliance
General Retail
Healthcare and Beauty
Source: Cushman & Wakefield Research
CUSHMAN & WAKEFIELD
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GLOBAL
RETAILERS IN
METRO MANILA
OUTLOOK
There remain a significant number of underserved and untapped markets within and
outside Metro Manila, which should provide prospective demand for international retailers.
Within Metro Manila, there has been redevelopment as well as expansion of established
areas and emergence of new districts, pushing development into fringe and pocket areas of
the metropolis. Property developers are now moving into community/neighborhood malls
model, positioning themselves closer to their consumers and enabling retailers to tap latent
markets.
Upcoming Public-Private-Partnership (PPP) projects, particularly infrastructure projects,
should be able to complement these property developments, contributing to urbanization
and driving economic gains. Enhanced mobility and accessibility should be able to expand
catchments of retailers not just within and adjacent provinces of Metro Manila but outside
the country, as well.
The improvement of airport facilities can facilitate growth in tourist arrivals, and provide
prospective demand for international retailers as well. This potential growth in tourists is
supported by the increasing availability of affordable flights due to the presence of low cost
carriers and budget hotels. The Entertainment City in the Bay City area, where a number of
hotel and leisure projects are situated, should be able to attract a market for high-end and
luxury products.
The 2015 ASEAN integration augurs well for the market as the free flow of capital, goods,
and services may increase retailer activity and spur consumer demand within the region. In
addition, the Philippine REIT market, while currently unattractive due to stringent rules,
should encourage investment inflows to the country if successfully amended.
Majority of foreign brands will still likely partner with local distributors to enter the
country for ease of doing business. However, the positive economic prospects of the
country and successful amendments of laws affecting the retail market, may find prospective
international retailers seeing the viability and economic value in setting up their wholly
owned corporation in the Philippines.
Indeed, the Philippines is a desirable market for international retailers. The strong economic
fundamentals and demographics of the country should drive healthy appetite for retail
goods moving forward. Retail competition may tighten as existing brands compete against
new retailers for the increasingly sophisticated consumer market and limited available
shopping space. However, a healthy shopping mall pipeline and presence of latent demand in
other areas of the country should be able to accommodate new retailer entrants to the
market.
1 Persons aged 15-64 years old
2 A 2013 study by Dr. Romulo Virola, Jessamyn Encarnacion, Bernadette Balamban, Mildred Addawe, and Mechelle
Viernes entitled “Will the Recent Robust Economic Growth Create a Burgeoning Middle Class in the Philippines?”
defined middle-income families as those with per capita income ranging between Php65,787 and Php805,582.
3 BPO firms, particularly voice services, generally require strong English communication skills and a high school
diploma
4 A 2008 study by Geoffrey Ducanes and Manolo Abella from the International Labour Organization (ILO), entitled
“Overseas Filipino Workers and their Impact on Household Poverty”, noted that OF
5 Mid- to high-end shopping mall space households had higher per capita income and expenditure than non-OF
households.
6 Out of 65 countries tracked in the report.
16
Indeed, the Philippines is a desirable market for
international retailers. The strong economic
fundamentals and demographics of the country
should drive healthy appetite for retail goods
moving forward.
For more information about
C&W Research, contact:
Joe Curran
General Manager
Philippines
+(63) 2 554 2927
joe.curran@ap.cushwake.com
Janlo de los Reyes
Manager
Research – Philippines
+(63) 2 554 2927
janlo.delosreyes@ap.cushwake.com
Cushman & Wakefield advises and represents clients on all aspects of property occupancy and
investment. Founded in 1917, it has 248 offices in 58 countries, employing more than 16,000
professionals. It offers a complete range of services to its occupier and investor clients for
all property types, including leasing, sales and acquisitions, equity, debt and structured finance,
corporate finance and investment banking, appraisal, consulting, corporate services, and property,
facilities, project and risk management.
This report has been prepared solely for information purposes. It does not purport to be a
complete description of the markets or developments contained in this material. The information
on which this report is based has been obtained from sources we believe to be reliable, but we
have not independently verified such information and we do not guarantee that the information is
accurate or complete. Published by Corporate Communications.
©2015 Cushman & Wakefield, Inc. All rights reserved.
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