LOCAL retailers are resorting to cost-cutting strategies such as reducing operating hours as they bear the brunt of inflation, according to the Philippine Retailers Association (PRA).
“Some retailers will probably, to improve the bottom line…engage in cost reduction probably in this case for most unprofitable stores, reduce operating hours, maybe reduce employees…that’s the last option,” PRA Chairman Paul A. Santos told reporters on the sidelines of the Global Anti-Illicit Trade Summit organized by Economist Impact recently in Taguig City.
Santos noted that now that the pandemic 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.”
He said some forecasts of local retailers may be reached by yearend. However, he stressed that the “biggest damper” to economic recovery in the retail sector is inflation.
Santos illustrated the trend in the behavior of consumers as inflation prompted them to be mindful of how they spend their money.
“We’re seeing a lot of consumers, apart from the initial wave of big spending, the period when the lockdown was relaxed, people are realizing that stuff is more expensive than it used to be and they are now prioritizing what to spend, how much to spend,” the PRA chairman said.
“So inflation is probably the 600- to 700-pound bear in the room that puts a damper on the prospects of economic recovery, improvement in retailing business,” Santos quipped.
Meanwhile, the PRA chairman unveiled strategies that local retailers “will probably” adopt as they respond to the threat of inflation.
One of these is engaging in “more promotions throughout 2023 to attract lost business,” he said.
At the same time, Santos said some retailers may explore other revenue streams like improving their online business or expanding in “previously unserved” markets in the Philippines; some will probably look for alternate sources of supply. However, he noted that “with inflation being what it is around the world, maybe that’s not possible.”
Another strategy is to introduce different packaging sizes. Instead of offering a product that weighs a hundred grams, retailers could opt to reduce it to 95 grams to be able to retain the price point, he said.
“So [there are many] techniques. There are a lot of techniques to be able to at least regain some of the lost business and maybe grow it somewhat. There are both techniques to improve sales or techniques that will reduce your cost. It will devolve around these two general directions,” he said.
The Philippines’s headline inflation slowed to 6.6 percent in April, the slowest in eight months and the third consecutive decline for the year, according to data released by the Philippine Statistics Authority (PSA).
PSA data showed inflation slowed from 7.6 percent in March but was still higher than the 4.3 percent posted in April 2022. The rate in April was the slowest since August 2022 when inflation was at 6.3 percent.