Philippine Retailers Scale Back as Global Oil Crisis Affects Consumer Spending

The Philippine retail sector is feeling the effects of the ongoing Middle East conflict as rising fuel costs ripple through the economy. Industry leaders report a significant decline in consumer demand, forcing companies to rethink expansion plans for the year.

According to Philippine Retailers Association (PRA) president Alice Liu, the first months of the year showed promise. "Most retailers, both food and dry goods, basically had a good first quarter," she said in an interview with the Philippine Daily Inquirer Liu also serves as CEO of Golden ABC Inc., which operates Penshoppe, Oxgn, and For Me.

But the surge in oil prices in March triggered an immediate shift in household behavior.

"The knee-jerk reaction of consumers was that they would really cut back on spending," Liu added in the PDI report. She noted that households are tightening budgets until there is more clarity in the global market.

Likewise, in an article by The Philippine Star, Liu explained that weaker foot traffic in early April reflected a broader sense of market uncertainty. It did not help that this coincided with the Holy Week break, a period when mall traffic typically dips as consumers travel to provinces.

The crisis is also forcing retailers to recalibrate their plans to open more stores this year. Golden ABC Inc., for one, has trimmed its store opening target from 87 to 60 locations.

Toby’s Sports is also scaling back. PRA chairman and Toby’s Sports founder Roberto Claudio Sr. noted that expansion is strictly dependent on consumer confidence.

"We have plans for bigger numbers of store openings, but consumer appetite is reduced simply because of fear," he said.

Businesses are currently in survival mode, with focus shifting from growth to margin preservation. "Interim measures," as explained by Liu, include the reduction of stock levels to avoid oversupply, reducing operating hours to minimize day-to-day costs, and prioritizing essential spaces rather than footprint expansion.

The franchising sector is not safe from the effects of the crisis. Steve Benitez, president of the Philippine Franchise Association and CEO of Bo's Coffee, noted that demand among potential franchisees has declined. Benitez highlighted that "the cost is primarily driven by the fuel prices," which has forced many businesses to absorb higher operating expenses and, in turn, raise prices.

But industry leaders remain cautiously optimistic. While Liu hopes that recent fuel price rollbacks will encourage a return of consumer confidence, Benitez believes the sector's growth will merely decelerate rather than stop. "It will be tough, but at the end of the day, I think the ones that will get stronger are the ones who are doing it right," Benitez told Inquirer.

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