From an optimistic four to six months to a more sober 18 months—that’s how long the Philippine economy will take to start recovering from the economic downturn in this pandemic, according to the country’s major retailers.
“Retail will have a slow recovery and will remain weak until we have a vaccine,” said Emerson Yao, managing director of Lucerne, retailer of luxury watches. “I believe some retail stores will permanently close, while some chains will need to downsize as a result of a huge drop in foot traffic within malls.”
Bryan Lim, vice president for business development of Suyen Corp. (Bench Group), agreed. “Hopefully we can start recovery by fourth quarter of 2021 or next year’s holiday season,” Lim told Lifestyle.
“By then, however, expect a change in the retail landscape as stores will close, mergers and acquisitions will take place, and new players will come in. However, recovery will always be contingent on how well we control the virus.”
Counting on the Filipino’s creativity and ability to “pivot quickly into new business models and repurposed roles,” however, Steven Tan, president of SM Supermalls, has a rosier forecast. “I predict that the Philippine economy can recover within four to six months,” he said.
These retailers have spent the last 10 lockdown weeks reorganizing their firms to adapt to changes caused by the pandemic. Without a vaccine in sight and with social distancing protocols still in place even as malls and stores reopen, retailers have invested not only in beefing up their e-commerce, curbside pickup and delivery services, but also in refitting their stores and retraining their staff to adhere to new health standards.
In luxury department store Rustan’s, for instance, only half its workforce in its stores, offices and warehouse is allowed to
come in at any given time, according to Donnie Tantoco, president of Rustan Commercial Corp., who also runs Adora and Royal Duty Free. All reporting Rustan’s staff, like at SM malls, are tested for the virus.
Retailers are applying the same rigorous sanitation procedures, mandatory temperature checks and no mask, no entry rule now in place in stores everywhere, to their corporate offices and warehouses.
Rustan’s has “physically reorganized parts of our store to allow for greater clearance and circulation,” Tantoco said.
At SM Malls, “safe malling” signages have been installed. There are “safety protocol officers” to guide mallers in observing the health protocols.
“We are well aware that retail is slowly reopening against a landscape of deprioritized consumer demand,” said Lim. “But the economy has to move on, and we need to roll the wheel.”
At Suyen, the first step was to recalibrate its disrupted supply chain, which means rescheduling production and deliveries. The three months of inactivity, Lim said, gave them the opportunity to prioritize relevant products, like its Alcogel line, an essential product line it was able to grow into subbrands through the quarantine.
“I guess the lesson is to find a way to creatively redefine your business to make it relevant to the times and to your community,” Lim said.
“We cannot say if ‘bounce back’ is the right term, as some of our stores will continue to operate at a loss until consumer confidence and their spending capacity are restored,” he added.
Create confidence, excitement
SM, which has over 80 malls across the country, is working with its tenants to create excitement and confidence in customers. “Case in point are Bench’s and Smart’s separate campaigns with K-drama star Hyun Bin, to jump-start interest in fashion and to gain new telco subscribers,” Tan said.
Lucerne, which deals with high-ticket Swiss watches, started to build its online retail arm. It has launched a concierge service of watch advisers, a service limited for now to select clients, said Yao. They’re also testing an appointment-type booking service for a private consultation in their stores.
Rustan’s, while also strengthening its e-commerce, is also striving to make the physical store experience still “meaningful, helpful and joyful,” said Tantoco.
“The problem of covering our faces is that it makes the interaction safer but also less human,” Tantoco noted. “At Rustan’s, service is meant to, first and foremost, create and sustain a real relationship.” Ergo, it is using color-coded masks, in the colors of the Philippine flag, to “make it easier to identify the specialist you are speaking to, and the specific way he or she can serve you.”
Retailers are cognizant of the obstacles ahead, and are responding cautiously.
“We are anticipating that for some people, luxury may not mean what it used to before COVID-19 (new coronavirus disease),” said Tantoco. “For some affluent customers, the changes will reflect in how they spend their discretionary money and also their discretionary time.”
“Globally, the industry is expected to contract by approximately 30 percent, according to industry analysts,” Lim pointed out. “This study was in the early stages of the COVID-19 crisis, and might prove to be the most positive scenario locally, where we have the additional variable of majority of the population with a diminished spending capacity. Their purchasing priorities will most likely consider fashion as luxury and thus put it at the lower tier of their needs.”
E-commerce, which was previously predicted as a factor of success for brands and retailers, has become just a “survival factor” during the crisis, Tantoco said. The absence of an e-store could mean extinction for the retailer, he added. “We are accelerating our efforts to get all of these fundamentals that we thought we needed five years from now, right now.”
However, Tantoco believes the luxury consumer will come back “as confidence in the economy improves,” though luxury “will perhaps have to be presented differently . . . Our CEO, Nedy Tantoco, and [SSI Group president] Anton Huang, who runs merchandising, are studying these new opportunities.”
He added, “I think we just have to serve our customers and communities, and keep surviving and sustaining ourselves through the short term, but also be ready to launch our more ambitious and riskier plans when the timing and the market conditions are less uncertain.”
“We have to consider that local retail does not consist only of us brands with several stores in different malls,” said Lim. “It also includes direct-to-consumer local streetwear brands, artisans who rely on pop-up markets like Katutubo and their provincial weavers, designers with RTW (ready-to-wear) businesses, local factories that form the production supply chain, creative agencies and freelancers, from photographers to models, and many others.
“Bench has always advocated ‘LoveLocal,’ but I think that the local retail community must band together now to rally for support for Filipino businesses, big and small, not just in fashion but in other industries, as well. There will be no economic recovery without active support from Filipinos.”
Tan expressed optimism since the pandemic, he said, “has actually brought about patronage for local brands.”
Tantoco also sees the situation as an opportunity “to respond to new aspirations, the new values that have emerged from this crisis . . . There are so many new underserved and meaningful needs now that a customer-driven and customer-caring retailer can understand deeply and fulfill squarely. There are new kinds of curiosities that we can help address. After all, today there are so many questions and so little answers.”
They all agree the government must step up to “support those who will lose their jobs during this crisis, and implement smart strategies to keep the
economy moving forward and safe for those who have a job,” said Yao.
Stimulus packages, ease of access to capital and loans and even microfinancing support would prop up the micro, small and medium enterprises (MSMEs), Tan said.
“The government’s main role is to bring the economy back to work while ensuring public safety. This is a very huge undertaking that cannot be done without support from the business sector and cooperation of the public,” Lim said.
“There are continuous discussions on how the business sector in general, and the retail sector in particular, can benefit from economic policies, such as loan packages and tax payment deferrals, but these need to be tailor-fitted to the needs of each business. Most immediately, government assistance to companies may be hinged against layoff of workers,” Lim added.
“The government also needs to continue to provide economic stimulus to affected families who have been furloughed or let go from their employment, returning OFWs (overseas Filipino workers), small and medium businesses, among others, to help them recover.”“I think the government should think of each sector as ecosystem. And they should look at what parts of the ecosystem need the most support,” Tantoco said.
“They should help and motivate companies to keep especially the daily wage earners employed. They should support SMEs that are part of this ecosystem . . . They should help companies that are generally strong, well-managed, with good governance, have an important service to perform for society that are only going bankrupt because of the crisis. These are what I would call avoidable bankruptcies. They should help companies protect the livelihoods of their lowest-wage employees,” Tantoco added.“In simple words,” Lim said, “there will be no vibrant economy without a vibrant market.”