Cebu retailers see crisis as opportunity for business growth

CEBU CITY, Philippines — Retailers here may be apprehensive of the projected economic slowdown next year, but they remain optimistic that this will pass and consumer spending will eventually bounce back. Bernie H. Liu, chief executive officer of Golden ABC, Inc., downplayed the tough economic conditions as being part of the business cycle. Consumers might control their spending and stick to essentials now, but they will eventually come back and start buying again, he said. Instead of letting fear rule, retailers should use their fear to innovate and find opportunities in, he added. Penshoppe, Golden ABC’s flagship brand, was launched during the 1986 People Power Revolution. Several other company milestones also occurred at the height of a crisis. "Times are hard, but definitely times are not hopeless... It’s just a business cycle and right now, we should just focus on surviving this cycle. When we are able to do this, we will definitely reap the rewards," Mr. Liu told members of the Philippine Retailers Association (PRA) Cebu chapter. Citing tried and tested strategies to stay afloat during tough economic times, Mr. Liu said some companies might have to control inventory, cut labor and other overhead costs, and outsource some business functions such as logistics, sourcing, warehousing and distribution. Other companies might be more optimistic and take the opportunity to improve their brands and customer service, expand strategically and follow the demographics to tap new markets. In the Philippines, retailers should tap the young population and determine the products and services that this market would need, he said. Mr. Liu also advised retailers to exploit technology, citing the growing online transactions worldwide. Retailers can put up a Web site, expand electronic commerce capabilities, advertise online, engage in e-mail marketing, join social networking sites and post commercials on YouTube. In the US, online sales last year were reported to be at $174.5 billion. This is expected to increase to $204 billion this year, about 17% of which would be spent on apparel, accessories, footwear, jewelry, cosmetics and fragrances. "The cost of Internet access is inexpensive and more affordable than maintaining a brick-and-mortar store. A year’s web hosting and domain fees can cost you less than P10,000," Mr. Liu added. Steve D. Benitez, founder and chief executive officer of Filipino coffee shop chain Bo’s Coffee Club, shared Mr. Liu’s optimism. Unlike big retail companies, Bo’s Coffee Club has a lean organization composed of key people who "multi-task." A Bo’s Coffee Club outlet is normally manned by eight to nine people. While big retailers might have to undertake some belt-tightening, Mr. Benitez said he and other small retailers may take advantage of their lean organizations and minimal overhead to grow their brands and position for the good times that will eventually come. He noted that most of the industry leaders now were borne out of a crisis. SM, for instance, started in the same year that former senator Benigno S. Aquino, Jr. was shot. Penshoppe and Bench were launched in the same year as the People Power Revolution. Bo’s and Junrex Cellphones opened their first outlets at the height of the Asian financial crisis a decade ago. Mr. Benitez said start-ups and small businesses should follow their example and move forward, albeit cautiously, during these tough economic times. "We can’t stop the slowdown, but we have to move forward. Start-ups should take this as an opportunity to position for the good times," he added. Bo’s opened its 35th outlet yesterday and hopes to open three more before the year ends. Two would be in Cebu while the third would be in SM Megamall. Next year, Bo’s Coffee Club will establish its presence in small cities like Tacloban. Mr. Benitez said his firm was still looking for franchisees in the cities of Dumaguete, Bacolod and Iloilo. International expansion will have to wait until the firm finds the right partner. — Marites S. Villamor, BusinessWorld