Can the everyday consumer shop the Asian market's economic woes away?
During bouts with depression or rough transition, a common quick-fix shoppers—mostly women—turn to is retail therapy. People equate purchasing the luxurious, glamorous, the newest, and the most fashionable items with feeling good about themselves. The high may be short-lived but does its job of curing the blues.
In a time of global economic downturn, perhaps Asian markets could learn a thing or two from shoppers who seek retail therapy. With stocks tumbling and currencies dwindling, financial markets should consider going into retail therapy as well, albeit the kind that cures an economic depression. Could financial giants turn to shopaholics to give the economy a much needed shot of endorphin? Retailers and shopping mall giants seem to think so.
Over the decade, the Philippines and China have seen a spike in the number of shopping centers. The Philippines boasts of having three of the top 10 largest shopping centers in the world: SM Mall of Asia, SM Megamall and SM City North Edsa. In the mainland, South China Mall, Jin Yuan (Golden Resources), along with the Beijing Mall, fill the top spots of the same list.
Malls have become more than just shopping centers. Developers have included attraction sites like arcades and indoor gardens. For most of the young, malls—often conveniently located near commuter terminals—have become the place to see and be seen in. They go there not just to pass the time or grab a bite. Malls, after all, give cities the quintessential urban feel.
So it's no surprise shopping centers are not just growing in number or leasable area. They have become something else. Mall operators and retailers no longer aim to just sell; they want to give people an experience. Shopaholics and mall rats, particularly the upper class, are spoiled rotten with the presence of shopping centers that house flagship stores of luxury brands.
In 2004, Louis Vuitton opened its largest luxury store in Shanghai. More recently in the Philippines, Ayala malls launched Greenbelt 5, which carries high-end stores like Michael Kors, DKNY, Zara, and several local designer boutiques. The growing trend of bringing big foreign brands to the country opens doors for people to experience not just the mall but the brand as well.
Having high-end retailers in the market is the economy´s version of comfort buying.
Shopping in the Time of Cholera
The luxury industry seemed unflinching in the earlier stages of the global financial crisis. But in the US, management of luxury boutiques such as Tiffany & Co. and Bulgari have put pipeline projects on hold to reduce costs. Other companies like Dior are looking at possibly closing down shops in US cities with smaller markets.
Luxury brand experts and analysts say, however, that Asian markets play a huge role in keeping the luxury industry afloat.
Recently, Nielsen conducted a global survey to get consumers' pulse regarding the economy. The survey found that seven out of 10 Filipinos perceive the economy to be in recession. Their common view, however, has not changed their spending habits. Filipinos are still seen spending, and even splurging, on clothes, gadgets, and vacations.
Shoppers are only more than happy to indulge in this sort of leisurely activity. Based on a recent Nielsen Media research, 40% of today's 90 million Filipinos live on just US$2 (13.70 yuan) a day, yet malls never seem to be empty. Mall operators say that status nor the current economic crunch doesn't seem to send shoppers running in the opposite direction.
Shop´til You're Up
The occasional “little purchase” of millions of shoppers flocking to malls everyday does wonders for business.
So it's no surprise retailers of high-end brands are raring to enter China and grab a piece of the action. The market—worth US$800 million (5.48 trillion yuan) last year alone—is ready to “power shop.”
According to a McKinsey and Co. survey, 41% of the Chinese respondents said shopping was their top leisure activity. The same survey showed 60% of respondents went for top brands. Even if they couldn't immediately afford the items, 69% said they would pounce at the opportunity to buy when they could. The study also revealed that Chinese liked keeping up with fashion and 52% equated low prices with low product quality. This mentality gave China the number three rank among all countries in terms of retail sales.
China's high-end market also acts as a buffer to declining businesses in bigger economies like the US, Europe, and Japan. Research firm McKinsey and Co. found that the lag in the three presented an opportunity for investors to consider doing business in emerging markets in Asia. Analysts say acquiring stocks in other Asian markets could boost the international portfolio of potential investors.
Like in China, “mallers” and power shoppers have hoisted Philippine retail industry to account for 15% of the country´s Gross National Product. They also help 5.25 million employees—which represent 18% of the workforce—keep their jobs in the retail industry.
The global financial crisis has, so far, not been totally adverse to the majority of Filipino shoppers. Prices of fuel and other commodities have gone down, and fluctuations in the value of the Philippine peso have given more purchasing power to families of almost 10 million Filipino migrant workers.
Asia has been helpful in keeping the retail and luxury industry growing at a healthy rate. Luxury store managers think that it's too early to tell if buyers have put their aspirations for high-end branded items on hold during this time of crisis. Even with tumbling stock markets threatening to rattle the industry, analysts and retailers remain optimistic that more people will seek solace and comfort in shopping malls.
Analysts believe that wealth could bud in a nation of mallrats, especially with a thriving segment of high-end power shoppers.
Print ed: 12/08