Holiday perks to drive consumption, spending

CEBU, Philippines - The extra money most people receive this Christmas is lifting local consumption and consumer spending, which makes up 70 percent of the country's total economic activity.

Shoppers are likely to drive the most festive holiday season with the expectations of sales to grow at a brisk pace throughout the year's last quarter.

The Philippine Retailers Association in Cebu has projected the holiday retail sales to rise, crediting it to the optimistic spending outlook for the local economy.

"Of course, the retail sales will increase every year over the last year because of our economic growth," PRA-Cebu president Robert Go told The FREEMAN.

According to Statista, an online statistics portal, the Philippine retail sales will grow by five percent this year from 4.9 percent growth rate last year.

Sales is seen to grow by 5.2 percent next year and in 2016 and reach the amount of US$ 140.49 billion in 2015. This is a higher forecast compared to this year's US$ 128.5 billion.

The increasing disposable incomes from both middle-income and low-income consumers have pushed the retail market to an upbeat condition, Go noted.

The fourth quarter of the year which starts in October through December is believed to be the period when people buy more and take on discretionary spending.

On the other hand, the third quarter, Go said, is the lean time for the retail sector due to the presumption that most people have spent most of their money for back-to-school needs.

The PRA has forecast that demand for both food and non-food products would abruptly rise throughout the quarter.

This is a quite different situation compared to the same period last year when food products were the most in demand because of the relief efforts for calamity survivors.

"Sales of non-food last year especially after the two calamities (the Yolanda and Bohol earthquake) significantly dropped because everything was concentrated on food," the president said.

He added more consumers are now expected to buy luxury goods with the gradual normalization of calamity-hit areas. Although not all of them are equally feeling the economy's recovery.

Other everyday shoppers cite the rising cost of living and the limited money as two of their main worries which also affect their purchase decisions.

Purchasing power

Go explained the high purchasing power of consumers during the holiday shopping could spur more growth in the retail market which is also supported by the healthier economy.

The 13th month pay and the Christmas bonus – aside from the usual paycheck – that workers receive could modestly increase consumer confidence.

"During this season, Filipinos want to spend because its holiday, we see the children want more gifts from their parents and people expect more money because of the bonuses," said Go, who is also chief executive officer of Cebu-based Prince Retail.

Promotional activities take on an aggressive move as retailers, in turn, also want to take advantage of those extra money from the consuming public.

Grocery operators and other retail shops make the most out of the Yuletide celebration by offering sales, discounts and shopping sprees to attract sales and drive customer traffic.

He noted companies make sure that offering discounts to shoppers does not sacrifice their desired profit margins amid being pressured on sales and margins.

The recent Business Expectations Survey of Bangko Sentral ng Pilipinas noted the optimism of businesses for the last quarter of the year because of the expected surge in consumer demand during Christmas.

The survey showed the overall confidence index significantly jumped to 48.3 percent from 34.4 percent in the third quarter of this year. — (FREEMAN)