While the country's retail sector is in a better position now compared to the period of strict COVID lockdowns, the elevated inflation is dampening the sector's recovery, according to an industry group.
On the sidelines of The Economist Impact's Global Anti-Illicit Trade Summit, Philippine Retailers Association (PRA) chairman Paul Santos told reporters that most retailers in the country have been enjoying an increase in sales as lockdown restrictions have been eliminated.
'Now that these restrictions are gone, people have come back to shopping and a lot of reports suggest that retailers have enjoyed an increase in sales, but have yet to achieve sales levels matching that in 2019,' Santos said.
Santos said that while some forecasts suggest that the industry would be able to match those pre-pandemic figures by year-end, current inflation issues are dampening the prospects of economic recovery and improvement in the retailing business.
'The biggest damper in economic recovery now in retail is inflation,' Santos said, adding that ' people are realizing now that products are more expensive than what they used to be and they are now prioritizing what to spend, how much to spend.'
Latest data from the Philippine Statistics Authority (PSA) showed that headline inflation, or the overall rate of increase in the prices of consumer goods and services, eased to 6.6 percent in April from 7.6 percent in March.
The latest inflation figure, however, is still higher than the 4.9 percent print in the same period last year
Average inflation for the first four months of the year registered at 7.9 percent.
In April, the Development Budget Coordination Committee (DBCC) increased its inflation forecast for this year to a range of five to seven percent from the previous target of 2.5 to 4.5 percent .
This is significantly higher than the 5.8 percent inflation recorded in 2022.
Budget Secretary and DBCC chair Amenah Pangandaman said the adjustment was made due to the persistent high prices of food, energy, and transport costs.
Asked how retailers are responding to the threat of inflation to their businesses, Santos said some may engage in promotions throughout the year to attract lost business.
He added that for unprofitable stores, some retailers may engage in cost reduction measures, particularly reducing operating hours and employees. He stressed, however, that this is the last option.
'At the same time, probably (they can) explore other revenue streams like improve their online business, expand in previously unserved markets in the Philippines or probably look for alternate sources of supply, but with inflation being what it is around the world, maybe that's not so possible,' Santos said.
In addition, Santos said some retailers may resort to introducing different packaging sizes to be able to retain price points.
'There are a lot of techniques to at least regain some of the lost business and maybe grow it somewhat. There are both techniques to improve sales or to reduce your cost,' Santos said.
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