Online shopping lingers past Covid

While Filipino shoppers are returning to physical stores, experts said the consumers still prefer buying their items online than in-store ahead of the holiday season.

However, other reports mentioned that the behavior might change next year as brick-and-mortar outlets start rebounding, too.

According to a report published by IT startup Meta in July this year, 67 percent of shoppers buy items in-store, while 79 percent make purchases online.

In general, roughly 7 out of 10 respondents shop via social media. They also plan to increase or maintain their spending from last year.

According to the report, mobile's share of discovery channels among Generation X and Baby Boomers increased by 13 percentage points to 76 percent.

Consumer behavior improving

Retail sales started to rise in the first quarter of 2021, according to a research from Fitch Solutions Country and Industry Research, as consumer confidence increased along with the economy's recovery from the Covid-19 pandemic.

Fitch Solutions added that household consumption may continue to increase between 2023 and 2026 at an average annual growth rate of 5.1 percent.

"Consumer confidence has improved in line with the economic recovery from the effects of the pandemic," Fitch Solutions said.

It added that "retail sales have continued to increase from [first quarter of 2021] onward at a relatively slow pace."

Holiday-induced spending

Owners of physical and brick-and-mortar stores experienced a substantial amount of bad luck in 2020 and 2021, when the Covid-19 pandemic was at its worst. Several stores failed and shut down as more people shopped online. However, the tide is also shifting in their favor, with all of the stores fully reopened amid rising inflation.

Another report from investment management company Colliers Philippines stated that the comeback of high-density retail segments like family entertainment centers is starting to increase Filipino customers' propensity to buy more products and visit traditional brick-and-mortar malls.

Colliers Philippines, citing mall operators, noted that consumer traffic is also returning to 2019 levels.

The consumer traffic is returning to the pre-pandemic levels since some prefer doing holiday shopping in-store, a report from Numerator mentioned.

Colliers, meanwhile, anticipated that holiday-related spending would help the industry and support a minor rent increase over the year.

According to Colliers, many stores are now eager to occupy physical space, which is good news for both merchants and mall owners.

However, the report noted several challenges that prevent the retail sector from growing despite the changes in consumer behaviors among Filipinos.

These challenges include disruptions in the supply chain, concerns about a worldwide recession, and persistently high inflation.

"Holiday-induced spending should further buoy the retail sector's recovery, [translating] to higher mall rents and declining vacancies," Colliers Philippines associate director for research Joey Roi Bondoc noted in the report.

Consumer spending to slow down

Meanwhile, Fitch Solutions mentioned that the Philippines' consumer spending might slow down to 5.5 percent next year from the anticipated 7.6 percent growth this year.

"We expect household spending to outpace consumer price inflation in 2023. This will ensure real income growth and greater potential for consumer spending," Fitch Solutions said.

According to Fitch Solutions, rising consumer price inflation has been the main risk to consumer expenditure through 2022.

"[Inflation] has been eroding purchasing power and shifting consumer spending away from discretionary spending; this is the economic reality consumers enter into in 2023," Fitch Solutions added.

The tightening of credit conditions worldwide has also put significant pressure on the Philippines and could harm consumer spending power.

The research firm added that inflation is likely to remain elevated, and they expect the Bangko Sentral ng Pilipinas to tighten monetary policy further to control the situation.