The Philippines for the past years has been a flourishing and thriving market for retail operations. International, national, and local players each have established their presence in key cities and are continuously expanding like wildfire to rural centers, even to before unexpected locations. In the past, most malls were only located in the cities, but recent developments have seen the rise of malls in every municipality and town. Expansion strategies of big mall owners to target more market segments have reached the provinces through smaller channel formats like supermarkets and groceries. The proliferation of convenience stores from business districts have reached the residential areas and are now present in every street corner. These developments were brought about by Filipino consumerism and the increase in their purchasing power.
International and national players have taken advantage of this progress and competed head-to-head on market share and profitability, leaving some local players dumbfounded on how to cope with the ever-changing landscape of competition due to the bigger investors and the ever-growing consumer needs. Yes, there may be an apparent difference in terms of investments and capabilities between big and small players, but that doesn’t sound all correct to be able to achieve success and compete fairly. The obvious disparity in the standing and going points of the retail players, oftentimes overshadow the core aspects of operating a business. This is where not only the local players are caught into but even the bigger players.
Market varies from one place to another, even in similarities there are differences and uniqueness. This aspect can be better understood by doing Market Research. Knowing and understanding the market is essential to planning and implementing strategies. What will work and what will not, what is necessary and what is not. Market research will help find out the right location for a business, the population to target, its demographics and economic base, and other necessary information. For instance, since the Philippines is an archipelago, topography and market composition differs from one place to another. The research will help retailers determine what format to implement based on the data gathered. Thus, market research will enable custom-fitting to a specific market.
Market research will tell retailers where to go. Location is crucial to a business’ success, that’s why most big players are looking for the best location rather than going for the cheapest one. Though not a priority, the cost of getting the desired spot is a consideration for retail operations. The space where to establish a business will somehow dictate its effectiveness.
Accurate strategic planning allows retailers to understand and select the best options for development in line with their ambition and financial capabilities. Understanding their strengths and weaknesses will enable them to act appropriately. A business fails mainly for two reasons: (1) Lack of planning and strategizing for development; and (2) Under-evaluating the costs of developing the business. Business owners all want to develop quickly but aren’t well-prepared with their business plans and commercial concepts. If market research tells where to go, good planning tells what to do and how to do it.
Organized retailers, mainly international and national players, have understood this from their myriad of experiences. They plan better and keep the trend while adjusting their commercial concept. Recent developments will show for instance, how some national players diversify and expand their retail operations. From the big malls, they have further saturated the market and extended their brand through smaller and complementary formats like supermarkets, neighborhood stores, and convenience stores. These aren’t out-of the-blue decisions, but rather part of their master plans, with some adjustments along the way as changes and development occur.
Adhering and being consistent with the plan is also essential. The lack of understanding of it will lead to random, inappropriate actions. Mid-term expectations are preferable to short term anticipations in order to avoid discouragement. Local retailers and outsiders, however, show hesitation and uncertainty during the development phase or the execution of the plan. Even on the first sign of difficulty, some immediately reconsider their plans. Remember, if you planned well, trust the plan and go with it. Make the necessary adjustments as you see fit. But again, don’t veer away from the plan. If the return of investment is slow, you can adjust the commercial concept and economic model, instead of stopping.
Organization and resources are rarely appropriate to face challenges in developing the company. Retailers see the necessity to upgrade the model but are hesitant to engage in necessary investments. They should make sure that their standards will support their ambitious development plan. Commercial excellence in merchandising and operations are required to achieve the expected level of performance.
Moreso, the alignment of plans with the entire retail organization is a pre-requisite to embrace changes that promise the company’s growth. Everybody in the group should be aware of the plan, be connected, and aligned. They should push for the achievement of the plan. This step will prevent internal resistance that might cause delays and gaps with the company’s qualitative and quantitative targets.
The discipline in monitoring the development of the strategic plan is an important factor to its success. Retailers usually focus quickly on the economic performance without ensuring that all conditions and pre-requisites have been set, thus resulting to wrong assumptions. It is important for retailers to have a management that concentrates on company goals, tackles unique scenarios, and provides a clear road map.
In a progressive and competitive retail environment, only those that are structured, well prepared, and equipped with the right tools will remain steadfast.
About the Author:
Eric Poiret
Strategic Planning Director – EuroAsia Research Experts
Eric has a solid experience of more than 25 years in the management of retail chains in the Gulf Region, Asia and France. Before becoming the Chairman of ERE, he was Managing Director for Metro Gaisano, Chief Operating Officer for ASWAAQ, a Dubai Government-owned company, and Chief Executive Officer for MAF Carrefour KSA. Eric Poiret’s expertise lies in strategic planning and operations management.