The Philippines is a consumer-driven economy, and statistics show that 70% of the country’s gross domestic product is attributed to consumption. Even amid the challenges and changes brought about by the COVID-19 pandemic, this Philippine drive to consume strengthened the resilience of the retail sector, making it one of the more stable segments of the economy.
This is evident from a survey by SM Supermalls, which shows that there were an average of more than four million daily shoppers in the first quarter of this year, an increase of 21%, compared to just 3.3 million in the same period last year.
Malls in the Philippines are more than just a place to shop. They have become hubs for social interaction, entertainment districts, and sometimes even shrines and evacuation centers during natural disasters. However, their main value lies in their role as an economic engine that drives local businesses and generates employment.
According to SM data, food tenants now account for 30% of leased retail space, a significant increase from just 10% a decade ago. Meanwhile, non-food tenants, including entertainment providers, occupy 50% of the available space, with the remaining spaces filled by various service-related tenants, creating a well-rounded mix that offers a wide range of options for shoppers.
These shifts in tenant composition and rising visitor numbers respond directly to changing consumer preferences shaped by the COVID-19 pandemic. As the pandemic changed what Filipinos considered normal, including their shopping habits, they sought more than just shopping options at the mall – they looked for spaces that offered safety, convenience and a sense of normalcy.
A 2021 study by global research firm PricewaterhouseCoopers (PwC) International Limited found that many trends in consumer behavior have changed significantly during the pandemic. The research shows that while in-store shopping is still preferred for daily or weekly purchases, preference for e-commerce and digital platforms is rapidly increasing.
PwC identified four fault lines to explain the rapidly evolving consumer behavior and preference for online shopping: namely the ‘Zoom effect’ or working from home, the generation gap, the ‘conscious consumer’ and East-West differences.
The Zoom effect refers to a new type of worker that emerged during the pandemic and worked from home and continues to do so. The research shows that they are significantly less likely to shop in stores. PwC also mentioned that the generation gap could also be a factor, as younger consumers are more likely to shop online.
COVID-19 also changed consumer habits, not only in shopping preferences, but also in spending habits. Some “conscious shoppers” plan to stay home and are increasingly willing to pay a premium for healthier, more local and more environmentally friendly products.
The cultural difference also plays a role in the choice between online and in-store shopping. PwC’s research found that 45% of consumers in Asia Pacific reported shopping in-store daily/weekly, and 40% via online platforms, compared to America, where only 38% of consumers regularly shop in-store shopped, and only 31% via mobile.
Regardless, the survey found that most Filipinos preferred to physically shop in-store. Nearly half of respondents in the Philippines say they have purchased clothes, books and electronics from physical stores in the past 12 months.
Moreover, “the ability to quickly and easily navigate the store to find products” and the preference “to see and touch the products” were among the factors that attracted Filipinos back to malls. Respondents also emphasized the value they place on “enjoying the social aspects of going to a store.”
In light of these trends, the importance of physical stores becomes clearer. Leechiu Property Consultants said stores are expected to remain relevant to consumers’ shopping experience despite the ongoing digital shift.
Leechiu Property Consultants President and Chief Executive Officer David T. Leechiu shared in a Business world report that “total online retail represents less than 20% or 30% of the world’s total retail supply, despite all the progress we’ve made in the online experience.”
While the trend is still shifting to online, Philippine consumer behavior continues to emphasize the role of malls in boosting retail sales. Shopping centers help maintain the relevance of physical stores and create an attractive alternative to online shopping.
Indian market research firm Mordor Intelligence estimates the size of the Philippine retail market at US$66.70 billion by 2024 and expects the sector to reach US$96.02 billion by 2029, with a compound annual growth rate of 7.56% during the forecast period. This growth in the sector is closely linked and can be attributed to the growth of retail sales in stores.
Results from online data platform Statista show that retail sales in the Philippines are expected to recover and grow by 2026, after a slight decline in 2021 and 2022. Pre-pandemic retail sales numbers at malls reached more than $52 billion in 2026. sales in 2017 before shrinking to just $46 billion in 2021. Statista predicts that in-store retail sales will rise to $57 billion by 2026, due to a strong recovery driven by increased consumer demand and renewed confidence in brick-and-mortar shopping.
This increased turnover in retail sales and the retail sector in general is also reflected in the growth of the country’s largest retail operators. In 2023, SM Supermalls reported revenue of P71.9 billion, up 30.0% from the previous year. Ayala Land’s malls saw their sales increase 31.0% to P21.1 billion. Robinsons Mall experienced a growth of 24.0%, reaching P16.2 billion. Similarly, Megaworld’s mall’s revenues increased by 54.0%, to a total of P5.3 billion, while Rockwell Land’s consolidated revenues also increased by 12%, to P18.5 billion in 2023.
The increase in sales of shopping center and retail operators, which are expected to grow further this year amid changing consumer habits, underlines the resilience and adaptability of physical retail spaces. Physical stores in shopping centers are far from obsolete and obsolete. However, experts advise retailers that changes need to be made to ensure continued consumer engagement.
“Retail spaces must reinvent themselves as a destination for new product launches and interactions, with a focus on improving the on-site customer experience and providing an online shopping alternative for the perusal and easy access of well-known products for returning customers,” said Joenes Jemola in an article published in Colliers Insights.
Moreover, Business world columnist and Colliers Philippines research head Joey Roi Bondoc said mall operators and retailers must work to improve their consumers’ shopping experience, both online and in-person. He explained that while Filipinos have returned to physical shopping, retailers should also consider the segment of Filipino shoppers who prefer to buy online.
“In our opinion, the redesign of physical retail spaces should be complemented by the improvement of retailers’ online shopping platforms. We predict continued redesign of physical retail spaces and we see this trend even after holiday spending,” said Mr Bondoc.
The resurgence of physical retail spaces in the Philippines, despite the rise of online forms, demonstrates the adaptability of malls and the value of the shopping experience for Filipinos. The role of malls and shopping centers in supporting businesses, generating employment, and providing space for physical stores will continue to propel the retail sector forward, proving the importance of malls in the industry and for the Filipinos. — Jomarc Angelo M. Corpuz