John Lewis is continuing its Asian expansion by opening 11 shops in the Philippines this summer, but why should retailers be interested in the country?

John Lewis aims to expand abroad

Planet Retail’s research director Malcolm Pinkerton says the region is seeing similar trends to that of the whole Asia Pacific region, which include consumers becoming wealthier and an increase in online shopping.

Growing middle class

“Much like the rest of Southeast Asia, the Philippines has a growing middle class with more disposable income and increased access to the internet,” he says.

The latest World Bank population figures for the Philippines from 2013 stood at nearly 100 million, while Planet Retail data forecasts total retail sales in the region will reach $141.1bn (£94.8bn) for 2015, up from $130.4bn (£87.6bn) in 2014. $63.6bn (£42.7bn) of this year’s sales will be non-grocery.

Total retail sales for 2020 are forecast to increase to $210bn, and $103bn of this figure will be non-grocery retail sales.

“These wealthier consumers are getting more affluent and want more Western brands,” Pinkerton says, explaining that the majority of consumers love shopping in the region’s physical department stores, which are destination spots where people can spend the whole day.

Traditionally, Singapore has been the “shopping destination” country in the Asia Pacific region, but recently the trend has been spreading to neighbouring countries – the Philippines included.  

“That will continue and that’s where the likes of John Lewis will want to get a footprint,” he says.

Online shopping

Pinkerton says: “There’s a growing opportunity and lots of retailers have already been dipping their toes into online in the region, and it is quite interesting John Lewis is going in a physical space, exploiting the demand for premium shopping malls and consumers still enjoy physical shopping.”

For 2015, Planet Retail estimates online sales in the Philippines will be $300m, representing 2.1% of retail sales. By 2020, this figure will have reached $920m, when online is expected to be 4.3% of total retail sales.

Challenges

But the large proportion of “under-banked” consumers without access to card payments makes online a challenge for retailers. One solution is to offer a cash-on-delivery service to build up consumer confidence online, while other retailers are starting to offer click-and-collect in stores.

“The real challenge will be around payment methods and fulfilment,” says Pinkerton. “Fulfilment and logistics are not quite as established, but that’s where physical retailers are looking to exploit collection models like click-and-collect.”