Better Christmas this year

It’s beginning to look a lot like Christmas for brick-and-mortar or physical stores.

It is beyond question that the digital economy boomed during the COVID-19 crisis. As pandemic-related lockdowns and fear of contracting the virus kept many at home, people turned to online shopping for their needs more than ever and many physical retailers stepped up to the challenge and created their own online presence.

One survey in the US said the pandemic contributed an extra $218.5 billion to e-commerce’s bottom line over the past two years. In 2021, consumers spent $870.78 billion online with US merchants, up 14.2 percent compared to 2020. If the pandemic did not happen, Digital Commerce 360 said e-commerce sales would not have reached $870.7 billion for two more years or until 2023.

From March 2020 to February 2022, US consumers spent $1.7 trillion online, or $609 billion more than the two preceding years combined (2018 and 2019), according to Adobe Digital Economy Index.

Adobe also revealed that consumers now spend an average of $6.7 billion online each month for groceries, up from $3.1 billion pre-pandemic, and it expects the category to top $85 billion this year.

But inflation, it added, has also contributed to the online sales growth since consumers paid over $30 billion more for the same amount of goods during the pandemic. But higher prices have not deterred online consumer spend, Adobe explained that folks have $2 trillion more in their savings account now than they did pre-pandemic, causing this amount of inflation to be digestible.

For the whole of this year, Adobe expects consumers could pay $27 billion more online for the same amount of goods due to inflation.

The pandemic has also significantly disrupted retailers’ supply chains, Adobe noted, with warehouses continually closing because of coronavirus outbreaks coupled with the surge in US consumer demand for goods, leading to inventory shortages and consumers encountering more out-of-stock messages. The supply chain has not recovered and Adobe expects out-of-stock messages to continue.

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In the Philippines, as early as last July, tech company Meta released a study which revealed that Filipino consumers are now returning to physical stores, but their digital shopping habits formed during the pandemic continue to be relevant.

The study reported that Gen Z and millenials are shopping more on social platforms.

There is also an interesting article on fwd.com.ph by Gelene Penalosa on the pros and cons of online shopping.

What are the pros of online shopping? First, it keeps you safe if you want to avoid contact with people. Second, it gives you more choices since online shopping give you access to goods that would otherwise be in different areas and all you have to do is search. Third, it is more convenient since online, it just takes a few taps and clicks and you’re done and there is no need to look through every store or every aisle just to find what you need.

But there are also cons to online shopping? One is it can lead to impulse buying since the convenience of it all means that it’s so easy to buy things that we do not need. Second, there are still risks to your data and account security since buying online means exposing your credit card and bank details to potential hacking incidents. Third is there is no guarantee of what you will receive since we do not actually see what we are buying. Expectation can be far different from reality.

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The range of choices available to consumers has broadened.

We used to do window shopping physically, going from one store to another to scout for the best buys. But now, we can look for the things we want and need online, compare prices, and if we need to maybe fit a dress or test an item, then we can make our purchases either through the online store or the brick-and-mortar outlets.

According to Colliers Philippines, Filipino consumers’ propensity to shop and visit brick-and-mortar malls is starting to rebound as it sees the resurgence of high-density retail segments such as family entertainment centers, and this should result in greater traffic in malls.

Colliers associate director for research Joey Roi Bondoc said in a recent report that many mall operators are reporting that consumer traffic is starting to bounce back to 2019 levels.

Bondoc expects holiday-induced spending will further prop up the sector and support a slight rise in rents throughout the end of the year. Many retailers, he said, are now willing to take-up physical space, which should bode well for retailers and mall operators.

Colliers is optimistic that vacancy across Metro Manila will improve by 2024 and this should lift mall lease rates.

The report revealed that in the third quarter of 2022, vacancy across malls in the metropolis reached 15.4 percent compared to 15.2 percent in the first quarter. However, major developers have been reporting that consumer traffic has now reverted to 85-95 percent of pre-COVID19 pandemic levels. Retailers have also been active in taking up physical mall space from the second to the third quarter as they take advantage of rising consumer traffic coupled with an anticipated increase in purchasing power due to the holiday season.

Bondoc however noted that the headwinds that will likely hinder the retail sector’s expansion include supply chain disruptions, global recession fears, and persistently high inflation.

Colliers expects a 16 percent vacancy in 2022 from 14.8 percent in 2021, which is attributed to the completion of 356,000 square meters of new supply. Retail vacancy is projected to increase further to 17 percent in 2023 before receding to 14 percent in 2024.

In the same report, the property consulting firm recorded a slight uptick in lease rates in the third quarter of 2022 of around 0.4 percent compared to the 1.7 percent correction in the first quarter of 2022.

Bondoc said the projected pickup in retail space absorption and consumer traffic for the remainder of 2022 should support the rebound in rents and that for the whole of the year, rents should grow by one percent.

But of course Christmas is not only about shopping. There are many things to be thankful for this year. We have survived the pandemic and that means spending another year with our families and loved ones and friends.

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