What foreign franchises need to know before going to the Philippines
The Philippines is fast becoming a favorite destination for international franchise brands, which is evident in the endless opening of foreign franchises in malls and shopping complexes all over Metro Manila.
Yes, the Philippines is back on the radar of international brands because the country’s economy is now on a bull run and is expected to continue accelerating for decades to come. The main reasons for this are its huge and young population, rising income and rapid urbanization, which are signs of long-term economic growth. This is the reason why international franchises are going to the Philippines in droves. And while majority of these foreign franchises are doing well, there are also a few that did not flourish.
Still the interest persists because the Philippines continues to be an attractive investment destination. Despite a slight slowing down, the Philippine economy still remains one of the fastest-growing economies in the world. Its middle class is also growing so fast that it is projected to outspend middle-class populations of some advance economies in about a decade or two.
Foreign brands that have just expanded or are trying to expand to the Philippines know that the earlier they start business in the country the more benefits they will reap as the economy continues to grow. But with a few foreign brands failing in their foray here, it is imperative that those that want to open in the Philippines need to understand the Filipino consumer.
Filipinos love to eat
One distinct characteristic about Filipinos is their proclivity to eat five times a day – at least. So, despite the stiff competition, the food sector continues to dominate the franchise industry. Even so, the retail and service sectors are also growing, especially businesses that cater to convenience or are family-oriented, or promote the education of children.
Filipinos are cost-conscious
Filipino consumers also avoid splurging but if they do, they do it for their family. But the general behavior of Filipino consumers is to scrimp. When they go shopping they look for promos and their favorite is the “buy one, take one”.
Another idiosyncrasy about Filipino consumers is their sachet mentality. If you visit supermarkets in the Philippines, you will notice products being sold in sachet packages. The Philippine economy may now be on the upswing but there was a time when it was underperforming. This resulted into the Filipino consumer’s tendency to scrimp rather than splurge.
But another way of looking at it is that despite the economic difficulties, Filipinos are still willing to buy if they are given more affordable options. This means that foreign franchises that wish to open to in the Philippines must learn to present their products or services in smaller or more affordable packages.
Filipinos save so that they can splurge
Filipinos may not be willing to splurge but they are willing to delay gratification so that they can go on a shopping spree. And when they do, their spending priorities are new clothes, new gadgets, home improvements and travel.
Filipinos are tech-savvy
Filipino consumers are also tech-savvy and consider technology as a useful tool when they shop. They do online shopping and even order burgers online. Another important characteristic of Filipino consumers is that they have the tendency to check out consumer reviews in the internet before buying a product or a service. This means that you need to have a good online reputation when doing business in the Philippines.
Filipinos are mall rats
Filipinos love going to the malls. In fact, malling is an accepted verb in the Philippines. Malls have supplanted the parks as places to socialize and to have recreation and fun. This may be the reason why four or five of the biggest malls in the world are found in the country.
Moreover, aside from these super-malls, there are also community malls, which are smaller and are designed to cater to a distinct neighborhood. With traffic expected to only get worse in the coming years, community malls are also foreseen to sprout all over Metro Manila and other key cities in the country.
It is also worth noting that Manila is not the only investment destination in the country. According to government data, the bulk of the middle-class populations in the Philippines are in Metro Manila, Central Luzon and Southern Tagalog. Outside Luzon, the areas where most of the middle class reside are Western Visayas, Central Visayas, Southern Mindanao and Northern Mindanao.
Filipinos are family-oriented
As mentioned earlier, a family man or woman may not spend so much for him or herself but he or she is willing to go on a spending spree for family and loved ones. This is the reason why Filipino consumers appreciate business establishments that offer products or services designed for the entire family. On a related note, Filipino parents also love spending for their children, especially for their education.
Other consumer trends
Aside from the above, here are a few opportunities that the Philippines has to offer for foreign franchises.
Presently, the country is seeing a rapid increase in high-rise condo living. Because of this, businesses that offer housekeeping, laundry services and home maintenance services will be on the rise. It is also believed that hotels, restaurants and other tourism-related businesses and services will continue to grow because tourist arrivals in the Philippines have been growing 100% every five years. Lastly, since the Philippines has a high number of health care professionals, retirement homes and assisted living facilities have good prospects here. Food and beverage, fashion and services will continue to grow.#
ABOUT THE AUTHOR
Chit Estrada is Executive Director of the Philippine Franchise Association
