MANILA, Philippines — The retail sector’s contribution to the economy is expected to increase to 20 percent by the end of this year as people continue to shop, according to the country’s group of retailers.
Philippine Retailers Association (PRA) president Roberto Claudio told reporters that the retail sector’s contribution to the gross domestic product (GDP) has been going up by at least one to two percent per year.
“So we feel probably, by the end of 2024, early 2025 that should move up to about 20 percent already,” he said.
He said that at present, the retail industry accounts for 18.6 percent of the country’s GDP with an average annual tax contribution of almost P750 billion for the period of 2018 to 2023.
In addition, retail is a major contributor in terms of employment, providing livelihoods directly to about five million Filipinos.
While PRA expects its sector’s contribution to the economy to grow as people shop, there are challenges faced particularly from those selling via online marketplaces.
Claudio said orders placed through online marketplaces, unlike those sold by brick and mortar stores, are not being subjected to value-added tax (VAT).
“It has created an unlevel playing field for existing brick and mortar stores here in the Philippines,” he said, noting this prevents physical stores from competing with the low prices offered by online foreign merchants.
He also said this deprives the government of revenues because as traditional retailers lose out to online sellers, their sales will go down and so will their tax declarations.
The group is hopeful that the proposed measure to impose VAT on online transactions passed by the House of Representatives and the Senate and up for approval by President Marcos will help level the playing field.
Claudio also said that while the PRA expects the share of online in retail sales transactions to continue to increase and reach 25 percent in three to five years, brick and mortar stores will continue to be relevant in catering to customer needs.
As of 2023, he said the share of online in retail sales transactions is at 15 to 20 percent.
“The new retailing will be serving the customer in whatever way he or she wants,” he said.
He said online channels will be there to serve consumers who do not want to go to brick and mortar stores, but some products will still need the experience offered by physical stores.
“So for us, retailing will be omnichannel. That is the new retailing,” he said.
He said around 30 to 40 percent of retailers in the country have adopted an omnichannel strategy of engaging consumers both through digital and physical touchpoints.
“We will coexist, both online and brick and mortar under what we call the omnichannel world,” he said.