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The intensity of competition varies across the industries. The intensity of competition is higher in low return industry as compared to high return industry due to less requirement for capital and common products that require minimum R & D (Research & Development) and efforts for production. According to Porter, the nature of competitiveness in a given industry can be viewed as a composite of the following five forces: 1. Rivalry among competitive firms 2. Potential entry of new competitors 3. Potential development of substitute products 4. Bargaining power of suppliers 5. Bargaining power of consumers
Industry Analysis Example (Porter s Five Forces and Complementors) Shopwise Super center Here is a very brief example of an Industry Analysis for the Cases using Shopwise Super center, specifically Shopwise Super center s competition in the consumer retail industry and not in the industries where it competes. Remember, that you are concerned with where Shopwise Super center is positioned in the industry relative to the respective industry forces. The industry:
In the Philippines, food retailing industry involves a wide array of sellers from the sidewalk vendors, wet and dry markets, sari-sari stores, groceries, supermarkets, hyper marts, warehouse and discount clubs and convenience stores. Food means brisk business. Food is intricately linked with its culture and traditions. In the family, food accounts for 43 percent of total expenditures. Outside the home, eating has become lucrative for the retail business. Expenditures for dining out, excluding corporate representation registered an average growth rate of 15 percent to 20 percent per annum in the last 10 years. In the quick service or fast food segment, the total market in 2000 was over PhP 30 B. (Palma, 2005). According to the Family Income and Expenditure Survey (FIES) of the National Statistics Office(NSO), household spending on food increased by 26 percent from 1997 to 2000. Personal consumption expenditure (PCE) on food and beverages in 2002 reached about PhP 448 B from PhP 401.7 B in 1998, or an average annual growth rate of about 3 percent (Omaña, 2005). Retail development y The Philippine retail market is well developed compared to other southeast Asian countries (Indonesia, Malaysia and Thailand, for example). The share of processed and packaged food sold in retail outlets was estimated at over 60 percent in 2003 (Reardon et al., 2003). There has been growth in the number of retail food outlets and fast food outlets in the Philippines in the past 15 years (Elsevier, 2005). Despite this growth, sales of fresh fruits and vegetables, meat, and fish are still largest in small locally owned convenience stores and wet markets (true in NCR and countryside regions alike) (Elsevier, 2005).The leading retail chains and convenience store chains in the Philippines are Filipino owned and are mostly concentrated in the NCR region. Table 5 provides an
overview of the leading retail and convenience chains, ownership, sales, outlets, and their locations.
Supermarkets are big business in the country. An industry report cited that there are about 5,000 supermarkets in the country in 2007 with estimated sales of over P100 billion. A supermarket is a self-service store offering a wide array of food and non-food items, which are organized into departments. It is a retail format that is bigger than a grocery store and it has from three to 25 counters. A variation of a supermarket is a hypermarket, which is larger in size and usually combined with a department store. A hypermarket has more than 25 counters and sells both wet and dry goods.
Concentration Although large food retailers appear to dominate the retail food industry, these retailers argued that they face stiff competition especially among supermarkets and have to practice loss leader pricing to maintain their market shares. They practice giving discounts, regular
a wide range of merchandise assortment.bargain sales. and the second largest broad lines retailer in the Philippines.08% concentration ratio and that they only have about 1% share of total sales. in line with the government·s thrust to liberalize industries. o Entry barriers are relatively high. One possible way of proving this claim is through the computation of the concentration ratios. the top four supermarkets only have a 1. and Sucat in Paranaque. Araneta Center. One of the arguments in the retail industry is that it is not the retailing sector but the food manufacturing sector that is highly concentrated. freshness. Antipolo. Retail trade liberalization Since 1954. Canning and processing vegetables. o Wal-mart often has an absolute cost advantage over other competitors. and is well-known for fun. smoking of fish and other marine products. locations. vegetable juices. Since then. and financial capital to fend off competitors. a diversified retail conglomerate. Generally. 2001). the pioneer in hypermarket operations in the Philippines. the retail trade sector has been exclusive to Filipino investors. brand name. and good product quality (Patalinghug.shopwise. In October 1996. data on concentration ratio support arguments that the retail industry is fairly competitive. Shopwise Supercenters Shopwise. Eleven of the 53 industries under this sector have four-firm concentration ratios of 100 percent. President Fidel Ramos signed an executive order advocating full liberalization of the Philippine retail trade sector. having ratios of at least 90 percent. All rights reserved. wine manufacturing industries among others have 100 percent four-firm rations (Digal. Libis. formally began operations in November of 1998. and affordability. Almost half of the 53 industries sectors in the country are extremely concentrated. Available data on these concentration ratios showed that supermarkets are actually not concentrated even in Metro Manila. as Wal-Mart has an outstanding distribution systems. Makati. Shopwise has gained a loyal following among a broad market segment. Harrison Plaza. Rather.ph/#/nav_about y Potential Competitors: Medium pressure o Grocers could potentially enter into the retail side.com. a bill was proposed in 1993 to open the industry to foreign investors in order to increase competition and improve efficiency. 1996). Shopwise is a member of the Rustan Group of Companies. http://www. reduction in margins. expansion of target markets. it has grown to seven branches located in Alabang. Copyright © 2010 Shopwise. It was finally signed by President Joseph Estrada in March 2000 for . However. bigger store space.
investment incentives. Policies Over the past two decades. quotas. its success rate was low as traders experienced high tariffs. the main economic policy toward industrialization was import substitution. The goal of the government to undergo industrial development resulted into the concentration of industries. and excessive government intervention under Marcos to more liberalized markets under Aquino and Ramos (Gonzales. Pricesmart. Pasig City (eastern Metro Manila) later. Seiyu. . the Philippine economy witnessed radical changes in its policies from monopolies. Its officials claimed that sales in 2001 were better than expected and that its Fort Bonifacio store was the busiest among all S&R Price sister stores in 14 countries.implementation. The government became dependent on regulatory controls. which opened its first store inside Fort Bonifacio in Taguig (southern Metro Manila) in May 2001 and a second store in Ortigas. and an overvalued exchange rate. cronyism. However. public enterprise. 1997). sheltered domestic markets. During the Marcos era. and trade restrictions. Other foreign retailers which had expressed their interest in Philippine market but have yet to make their presence here include Ahold. Seiyu. 1999). and Welcome. and distorted price signals (Patalinghug. The first major foreign participant in the liberalization of the country¶s retail sector is S&R Price Membership Shopping.
SM Supermarket The largest supermarket chain in the country is SM Supermarket. Supervalue Inc. of outlets 23 11 8 Supervalue Inc. there are three main incumbent companies that exist in the same market as Wal-Mart: Sears. K Mart. 32 Rustan's Supermarkets and Expresslanes 22 Shopwise 7 y Source: Company websites. The very first SM Supermarket was established in . real estate. o Mature industry life cycle. is part of the SM group of companies which is involved in retailing. During the Ramos administration starting 1992. among others. Table 2. o Sears and K-Mart seem to be drifting and have not challenged K-Mart in sometime. banking. were implemented.Under the Aquino administration in 1986. These three accounted for 71% of the gross revenues of the leading supermarkets in 2006 as listed in the Philippines' Top 1000 Corporations. Robinsons Supermarket and Rustan Supermarket. To promote competition and efficiency. o Target has experienced tremendous growth in their domestic markets and have defined their niche quite effectively. most of the unfavorable economic policies were removed. the policy of less government intervention was sustained. such as the Foreign Investment Act of 1991. although there were a number of policy reforms. the implementation was highly constrained by the lack of adequate financial resources. and Target. Robinsons Supermarket Corporation Robinsons Supermarket Rustan Supercenters Inc. the foreign exchange y Rivalry Among Established Companies: Medium Pressure o Currently. which is operated by Supervalue Inc. Number of outlets of the top three players in the supermarket business Company Name of supermarket SM Supermarket SM Hypermarket SaveMore No. However. It was during this regime that foreign investment liberalization laws. Target is the strongest of the three in relation to retail. y The top three supermarkets in the country are SM Supermarket.
SM also operates SM Hypermarket which first opened in Sucat. It caters mainly to households with budgetary constraints by offering lowerpriced items under SM's private label. Bonus. Since its establishment in 1999. Inc. Their purchasing power is extended now that all major credit cards are accepted. SaveMore offers the convenience of a first-rate indoor wet market. Diokno Boulevard. The Food department is made up of a variety of Dry Foods and Fresh produce.1985 in SM City North Edsa. ARO and SAVEPAK product managers source consumables that provide high quality and better value for money. Parañaque in 2001. SM Hypermarkets offer food. SaveMore branches are neighborhood stand alone stores unlike the usual SM supermarkets and hypermarkets which are found inside SM malls. J. electronics. Pasay City. MAKRO has its own product line of high quality Food and Dry Goods product that are more affordably priced. Q-BIZ offers excellent stationery products and office supplies. Today. fresh and frozen items as well as general merchandise products. The Dry Goods department features an extensive assortment of appliances. three more shopping malls will be opened to bring the total number of SM department stores to 15 nationwide. (SMPH). offers a wide variety of fresh and affordable selections to choose from. ARO and SAVEPAK are made up of high quality household durable and consumable goods. Currently around 485 articles are registered under ARO and SAVEPAK trademark among them are fresh produce and dry foods that are canned or packed from frozen foods to detergents and pet foods. appliances and school supplies are now available in smaller packs. 1300 Philippines MAKRO stores are set up to allow customers to conveniently find what they need. Mall of Asia Complex. The whole family is welcome to enjoy more and better deals with its free membership and parking. SM likewise runs a chain of SaveMore supermarkets. opened two more shopping malls last year. Building E. . bills payment counter for the customers convenience. there are about 23 supermarkets which can be found in strategic locations in Metro Manila and in key cities outside Manila. SM allots about P2. there are now 8 branches in the country. fresh produce. house and office furniture. food and general merchandise store. The number of branches has since grown to 11. # Disclaimer SM Corporate Offices. SM Prime Holdings. According to an industry report. Groceries. This year. supermarket sales including hypermarket sales account for more than half of SM's retail sales. office supplies and do-it-yourself products. It is divided into Food (Fresh / Dry Food) and Dry Goods departments along spacious aisles. whose earnings have been growing at a steady rate of 13 percent annually. Sensing the brewing competition posed by new foreign players. audio and video equipment. now a member of the SM Group. The new Makro.W. the holding company for the SM chain of department stores.5 billion for constructing new shopping malls every year. local retail firms are not to be dislodged easily.
Top Shop. houseware. Toys R Us. There are now 32 branches in various parts of the country. in 1988. the developer of 10 Robinsons shopping malls and Big R and Hypermart supermarkets..the company introduced the "warehouse club" concept. similar to Makro and S&R Price. For our dry foods and fresh produce. The first Robinsons Supermarket opened in Cebu in 1985. plantations and manufacturing facilities everyday. Five years later. One of the largest chains of supermarkets in the country is Robinsons Supermarket Corporation (RSC). We assure our farmers and growers of their income by committing the whole harvest while providing the logistics to transport the produce at the quickest possible time. Handyman Do It Best Center." The low maintenance requirements of warehouse clubs enables Uniwide to offer goods at the lowest prices. Uniwide. Unbelievably low prices and excellent quality of goods attracted vast masses of people to the Uniwide Sales Textile Bargain House Centre at the top floor of a major bookstore in downtown Avenida. they¶re as fresh as they were harvested. Robinsons Land Corp. RLC operates three Big R Super Stores. Working closely with our suppliers.'s Robinsons Retail Group. Inc. Robinsons Appliances. upon registration with the Securities and Exchange Commission. Dorothy Perkins. Manila. and True Value. Wallis. the first Uniwide warehouse Club . Uniwide Sales Uniwide was established by the Gow family as a textile bargain house in January 1975. It belongs to the JG Summit Holdings Inc.Eventually. appliances and groceries.Makro is committed to providing customers with a steady supply of food and dry goods products with the highest quality at the best price. Tremendous success prodded the Gow family to expand store's merchandise assortment to include ready-to-wear apparel. accessories. became a fullfledged corporation under the name Uniwide Sales. they have improved on their processes and quality assurance. is investing P3 billion to P4 billion in building seven new shopping malls within the next 18 months. which operates Robinsons Department Store. There are also reports that Robinsons Land Corp. (RLC) is in talks with Prime Orion for the setting up of a Big R warehouse in Tutuban Center. a novel idea in the Philippine retail industry The mass-oriented warehouse club concept. in 1983. our supplies come straight from the farms. guiding them with Marko¶s strict standards. allows consumers to enjoy the convenience of "one-floor shopping . When you buy food item from us. Uniwide became a complete department store and supermarket chain with various strategically -located outlets. which offer warehouse-shopping retail/wholesale service.
Puregold Landmark Hi-top Supermarkets Unimart Daily Supermarket Table 1. the Uniwide Holdings.was put up in Libis. (UHI) was incorporated in September 1994. warehouse-typestore. bags. several other Uniwide warehouse clubs were opened at prime locations within a couple of years. The Uniwide Warehouse Club offers the convenience of "one-floor shopping". ready-to-wear apparel. Inc. cosmetics. To consolidate the real estate interests of the Gow family. Marketing Company.P. The company's stores are situated at prime locations and carry a wide range of quality and affordable goods .134 4.T. 2006 (P million) Company Supervalue Inc. As the company embarked on the development of more warehouse clubs as well as other commercial and residential projects. (c) Rustan Commercial Corp. total sales reached 13 Billion or US$5 Billion.grocery items. toys. In 1995. 2006 31. (b) Rustan Supercenters Inc. (d) L. home decor. Owing to the enormous success of the breakthrough concept. hardware.185 . houseware. Everything that one could ever need can be found right there in a huge.779 8.495 8. toiletries. Uniwide resolves to establish more consumeroriented wholesale and retail businesses and build total communities throughout the country. appliances. school and office supplies. one-floor.cassette tapes and a whole more. Uniwide Stores provide consumers with the comforts of shopping in style while enjoying the benefits of cost-competitive products. all of the company's outlets secured a spot in the list of the Top Corporations in the Philippines in 1990. shoes. Uniwide also distributes an interesting variety of specialty items from household gadgets to assorted food items to trendy clothing to high-tech toys and the most advanced appliances. (a) Robinsons Supermarket Corp. Gross Revenues of Leading Supermarkets in the Philippines. Uniwide is committed to cooperate in nation-building by helping to diffuse economic activities to the countryside. The Uniwide Sales Realty and Resources Corporation (USSRC) was formed in 1989. Inc. As testament to the triumph of Uniwide Sales. Quezon City in 1988. UHI also serves as the central franchisor of the system of operating Uniwide warehouse clubs and department stores.454 13.
convenience in shopping The number of dual-income families has also expanded which has not only improved purchasing power but has also made shopping more valuable. Inc.Grand Union Supermarket. Inc. Waltermart Ventures. Inc. Inc. o Consumer could shop at a competitor who offers comparable products at comparable prices.083 1.848 1. (e) TOTAL 3. processed products and other grocery items such as toiletries are not usually available. DEMAND CONDITIONS The purchasing power of Filipino consumers has improved over the last few years. Inc. Inc. Inc. Inc. Tropical Hut Food Market. While many Filipino consumers still shop at wet markets for fresh vegetables and meat.432 2. many have shifted to supermarkets because of convenience.043 870 86. consumers look for convenience in shopping. They prefer one-stop shopping to minimize . o Consumer advocate groups have complained about WalMart¶s pricing techniques.266 1. City Supermarket. Waltermart Supermarket. but the convenience is lost. In wet markets. Hi-top Supermarket. Alturas Supermarket Corp. Grocers Central Alliance.516 1. the choices are limited.715 2. Garbes and Garbes Trading Corp.761 3. Even if they are. Royal Duty Free Shops. one-stop shop They want a one-stop shop where they can buy most of the things they need in one trip.325 2. With higher household incomes.906 y The Bargaining Power of Buyers: Low pressure o The individual buyer has little to no pressure on Wal-Mart.
During weekends. cleaner and more comfortable to Supermarkets are also cleaner and more comfortable to shop because they have airconditioning. While prices are cheaper in wet markets particularly for vegetables. and meat. Likewise. they are spacious and well maintained. improved purchasing power has made consumers more mobile as many families now own cars. which have made shopping centers more accessible. consumerism in the Philippines is gaining some attention. The Department of Trade and Industry. high income consumers are willing to pay more for convenience. they are known as palengke. Shopwise offer free parking for a minimum purchase of 300p and free for their elite card members. particularly in urban and suburban areas. where both wholesalers and retailers locate. the location advantage of sari-sari stores has diminished. Moreover. specialty stores. Also. even if they have to pay more. They are located in shopping centers or within the mall with department stores. Value consciousness-consumerism Filipino consumers have also become value-conscious8 . Some supermarkets have also extended store hours to provide customers with longer time shopping time. Libreng hatid and shuttle services Thus. Unlike wet markets. is educating consumers on their rights and how to get the . Exclusivity of products Imported items and certain supplier tie ups of supermarkets make them the only choice. some supermarkets also open earlier than usual. on the other hand. Access to other businesses. Although grocery stores carry both perishable and nonperishable items. together with consumer groups. Accessibility Moreover. they cannot offer as much variety as supermarkets due to limited shelf-space. not only due to higher income but also due to higher educational attainments. Based on In the Philippines. fish. fruits. sell limited items and do not carry perishable food such as vegetables. there has been a significant improvement in infrastructure facilities and transportation systems.time and energy. many consumers can now afford to buy their groceries in bulk for weekly consumption. entertainment facilities and other amenities. Supermarkets sell both perishable and nonperishable items such as canned meat and vegetables and nonfood items. due to increased purchasing power. Sari-sari stores.
were able to take advantage of this. rather than producer-driven. In its latest report. value-added networks (VANs). especially in rural areas. Their dominance. and the electronic data interchange (EDI) (PASI. particularly among richer Filipinos in Metro Manila and other urban areas. intimate customer service and payment flexibility (Philippine Food and Beverage Retail industry: Opportunities for Canadian Exporters. Sari-sari store is defined as small grocery or convenient store that serves the basic food and grocery essentials of the households. According to Philippine Retailers Association (PRA). sari-sari stores dominate the retail market as they account about 70 percent of the total. indicates the evolving mode of payment by Filipino consumers. for one. While price remains the top consideration of poor Filipinos in purchasing products. Sari-sari stores are usually constructed as an extension of the owners house. only the large food retailers. y Bargaining Power of Suppliers: Low to Medium pressure . However. The local retail industry is also following the global trend of using an automated system in managing consumer needs. There is also a changing pattern in the way Filipino consumers pay their bills. Return and exchange policy of supermarkets. due to the high capital requirement of this system. This.5 billion (US$847 million) in the third quarter of 2001 from only P32. The entry of market research firms that monitor consumers buying habits and spending patterns is pointing to retail companies desire to satisfy if not saturate the needs of Filipino consumers. The 5. this is not necessarily true for the whole population.6 percent growth in the trade sector in 2001 was supported by 34 percent increase in credit card loans in the third quarter of the same year.5 billion a year earlier. For example. The latter has significantly reduced the inventory costs of retailers. A number of American middle-class brands have carved their niche in Philippine market. This was because this technology has allowed them to automatically purchase from their suppliers electronically. the Central Bank said credit card loans surged 34 percent to P43. This is not available to sari sari store and convenience stores The success of these supermarkets was reinforced by their use of high-tech facilities such as the point of sales (POS) scanner system. The availability of credit card and eps payment modes This service is only available to supermarkets And a few groceries.best value from their money and a high demand for convenience. most non-food retail items carry a 20 percent to 30 percent profit margin. which have access to credit. particularly those made from the United States. 1995). Typical markups for products are estimated at 30 percent of invoice value. In the Philippines. Filipinos are known for their penchant for foreign-made goods. food distribution is increasingly becoming consumer driven. 2000). is due to geographical convenience.
Close-Up toothpaste. Some also offer exclusive or unique items to entice customers. traders and importers. on-line grocering has been implemented for some time by large supermarkets but they have stopped the service. etc. Shopwise's Save Big and Robinson's Supersavers. and Lifebuoy and Lux soap. Rexona deodorant.) and home appliances. Rustan's Sure Buy. Surf detergent powder. Pond's beauty products. hypermarket. ticketing. etc. school supplies. packaged. up from around P20 billion in 2000. Preliminary estimates placed Unilever¶s sales at P24 billion last year. The large supermarkets also have their own private label products such as SM's Bonus. belle france products Processed products as retailers source them from large local and multinational firms. among others. clothes. which may exert countervailing power against retailers Due to the rift between Colgate Palmolive and Sm. cell card counters. Supermarkets carry a wide array of products from food (fresh. Many supermarkets now offer value-added products and services such as bills payment. SUPPLY CONDITIONS Exclusive distribution of sinandomeng .g. o Wal-Mart does deal with some large suppliers like Proctor & Gamble. o Wal-Mart could vertically integrate. Further. The products are sourced from local producers.o Since Wal-Mart holds so much of the market share.). The intensifying competition in the market will also spur supermarkets to pursue more creative approaches. is spending P1 billion in its expansion plans. canned) to non-food items (household. Distributor Unilever Philippines Inc. personal care. Coca-Cola who have more bargaining power than small suppliers. warehouse clubs) also carry general merchandise (e. Some supermarkets like Rustan's directly import some of its products. Creamsilk hair conditioner. courier services. Vaseline skin lotion. as it reported a double digit growth last year. photo developing. they offer a lot of business to manufacturers and wholesalers. Shopwise and the other supermarkets have a supply advantage over SM .g. Some formats (e. Unilever distributes leading home and personal care brands like Sunsilk shampoo. This gives Wal-Mart a lot of power because by Wal-Mart threatening to switch to a different supplier would create a scare tactic to the suppliers.
and development of marketing strategies in general. large manufacturing companies such as Procter and Gamble are establishing strategic partnerships with retailers via programs such as efficient consumer response. The SM Group. and so on. In the Philippines. owns Banco de Oro. However. Procter and Gamble. especially with a POS system in place. the lag between purchasing and delivery time is not only greatly reduced but will also minimize inventory cost. for example. In this program. control. This is a major breakthrough in retailing as retailers can now automatically purchase from suppliers electronically through the system. this technology requires large capital outlay and is only feasible for large food retailers who have access to credit. and relatively advanced management information systems. This is expected as the value of market information is higher for retailers with substantial market share and bigger potential. large retailers have substantial investments in banks. Otherwise. The benefits of adopting this technology go beyond enhancing merchandise planning. This information is vital to product development. these retailers have a competitive advantage over those who do not have a strong financial network. and monitor sales and profitability particularly in allocating space to various brands for a certain product category. based on the experience of one large retailer in the country. for example. A number of value-added networks (VANs) have been established and a standard purchase message format has been adopted to operationalize the electronic data interchange (EDI) (PASI 1995). Through an effective computerized inventory management system. and market information systems. it appears that manufacturers such as Procter and Gamble prioritize retailers with sizeable market share. which are highly perishable.The majority of supermarkets in the Philippines have now installed point of sale (POS) scanner systems. big potential for growth. A few have sophisticated systems where the POS is integrated with the inventory management system. which may exert countervailing power against retailers. retailers and manufacturers jointly monitor and analyze sales behavior based on various factors such as advertising. this situation is reversed in processed products as retailers source them from large local and multinational firms. have the most current market information. Unfortunately. insights gained from market analysis would not be as useful if they were based on an insignificant portion of the market. However. RAW MATERIAL SUPPLIERS Producers-farmers low bargain power Particularly for fresh fruits and vegetables. being closest to the consumer. these inadequate and inefficient transportation and . One of the essential elements for strategic partnerships to work is a well-established information system. introduces their program called SPACEMAN (space management) to improve retailers· existing merchandising systems by assisting them to effectively plan. Manufacturers have the incentive to establish strategic partnerships with retailers because the latter. evaluate.9 The main goal is to maximize manufacturers· and retailers· profits via better market information. improved customer service. Strategic partnerships In the Philippines. Clearly. production scheduling. sales promotion.
large retailers purchase . resulting in losses and decreased capability ratings from local and foreign buyers Traders-high bargain power This problem is further compounded by the absence of a grading system. small and medium-size retailers are constrained to purchase their goods from middlemen at higher prices due to inadequate telecommunication and transportation facilities.against retailers. food processors and retailers directly buying from primary producers.Due to availability of imported goods in Because of the perishable nature of agricultural products and inadequate infrastructure. These supply conditions limit integration of markets and provide an environment conducive to exercising buying power among wholesalers. the largest agribusiness firm in the country. such as prices of certain varieties and qualities. are highly differentiated. one of the major constraints is the lack of uniform grades and standards. this situation is reversed in processed products as retailers source them from large local and multinational firms.moderate . being dominated by brands of large corporations such as San Miguel Corporation. The largest. However. particularly in rural areas. particularly San Miguel Corporation and Purefoods Corporation. which include wholesalers and retailers. 9). Their bargaining power is weakened relative to that of traders. the high cost of power and lack of infrastructure support. The present system is based on subjective judgment of size. RORO Meat and dairy products. farmers are unable to receive higher prices. A number of large food companies are vertically and horizontally integrated. preferring to carry other products such as computer chips and electronic devices. is not transmitted efficiently to farmers. quality. poor infrastructure. and ornamental industries. vegetables.communication facilities have adversely affected their movement. Retailers. 1996. This causes delays. operate their own retail outlets for processed and unprocessed meat products. for instance. as market information. and variety rather than on well-defined and objective standards (Lantican et al. In the fruits. These products are also given low priority by airfreight carriers. who have the resources and better market information. p. which may exert countervailing power . Food manufacturers aggressively promote their branded products through advertising.
Altogether. certain conditions must be satisfied. et al. and the lack of a grading system for these goods. quality. 1996). In addition. However. Due to these inadequacies in the distributional system. even among the upper income classes.directly from farmers and farmer cooperatives. the industry has become a lucrative market for agriculture. these have limited the integration of markets and have provided an environment that is conducive to exercising buying power among the wholesalers. 1995). due to the geographical characteristics of the Philippines. For instance. grading system is sometimes based on subjective judgment of size. distribution of these goods has become costly. First. because of stiff competition the players in the food industry must be ensured of quality and freshness of raw materials. and variety. trading between buyers and sellers has been greatly constrained (PASI. However. which on the other hand is being enjoyed by the retailers and 7 . This situation is further complicated by the poor infrastructure facilities. SM and Robisons also have their brand or by products of meat and poultry. They may also possess oligopsonistic power as agricultural products are perishable and bulky with high transportation costs. food processors and retailers directly buying from primary producers. Farmers usually receive lower prices due to the agriculture products¶ high perishability and the lack of adequate infrastructure facilities in the country. Also. rather than on well-defined and objective standards (Lantican. Impacts on Domestic Agriculture The growing competition within the convenience food industry has important consequences for the agricultural sector. they must tie-up with reliable suppliers of raw materials for smooth operations. primitive sea and air transportation systems.. Atomistic farmers and wholesalers are the primary sources of vegetable and fruits by the retailers. Shopwise. The large supermarkets have noted increasing patronage of their house brands. These limit the mobility of products and accessibility to buyers particularly those who are not close to production areas. They have lost their bargaining power. Shopwise also imports meat products exclusive to their stores.
Macabasco (2004) pointed out two essential attributes that make imported vegetables more attractive to the institutional markets and the supermarkets who cater to the high-end consumer markets. In particular. importations of vegetables have grown sevenfold since 1996 to 2002. imported vegetables are cheaper by 30% to 50% compared to some of the locally produced ones. What they just usually get from other countries are the cooking equipment and utensils that are specifically made for their products. many agricultural raw materials and ingredients have to be imported. a major food item in the fast food industry. local potatoes do not meet the quality required for production of French fries.wholesalers who have the resources and better knowledge of the market situation. potato. . In a more recent study. 2005). the agriculture sector has limited carrying capacity to provide the industry¶s bulk requirements. In turn. First. the local food chains seldom export. the local livestock sector cannot provide enough beef supply. 2005). this advantage of both retailers and wholesalers are not absolute. In turn. cheese and other dairy products (Palma. However. These include beef. and which will be used in their overseas branches (Palma. On the other hand. for they are deprived of such power when they are into processed goods. Second. they are better packed and generally of better quality. Impacts on Trade In some cases. However.
1999). such as the Foreign Investment Act of 1991. the policy of less government intervention was sustained. although there were a number of policy reforms. and excessive government intervention under Marcos to more liberalized markets under Aquino and Ramos (Gonzales. Under the Aquino administration in 1986. its success rate was low as traders experienced high tariffs.Policies Over the past two decades. and an overvalued exchange rate. and distorted price signals (Patalinghug. the foreign exchange 3 . investment incentives. the main economic policy toward industrialization was import substitution. most of the unfavorable economic policies were removed. It was during this regime that foreign investment liberalization laws. 1997). public enterprise. To promote competition and efficiency. were implemented. sheltered domestic markets. cronyism. The goal of the government to undergo industrial development resulted into the concentration of industries. and trade restrictions. The government became dependent on regulatory controls. the implementation was highly constrained by the lack of adequate financial resources. However. the Philippine economy witnessed radical changes in its policies from monopolies. quotas. During the Marcos era. However. During the Ramos administration starting 1992.
PSC received 47% of PSPC stock as payment.e. safe and friendly environment. o Online shopping proves another alternative because it is so different and the customer can gain price advantages because the company does not necessarily have to have a brick and mortar store. PSC was registered with SEC on 29 November 1982. Concurrent with the transfer. using funds from existing and approved credit y y y y . 35 will be converted into 7-Eleven Stores. operating a chain of 24-hours convenience stores. there are not many substitutes that offer convenience and low pricing. the local franchise holder of 7-Eleven Stores. As part of PSPC's main business. In exchange thereof. Vicente T. expects a boost in annual revenue of up to P557 million from its acquisition of 39 Binggo 24-hour convenience stores from rival Jollimart Philippines Corp. Paterno and Francisco R. The company¶s chief mission was to introduce an entirely new retailing concept to the Filipino consumers. Pardo. o The customer has the choice of going to many specialty stores to get their desired products but are not going to find Wal-Mart¶s low pricing. Philippine Seven told the stock exchange. but which remain based on the fundamental principle of the simple business concept it pioneered over 70 years ago . 1982. Of the 39 Binggo stores. Hence. Makati City. together with some of its store properties. passing the savings onto the consumer. (PSC) acquired the license agreement to use the 7-Eleven Convenience Store system in the entire Philippines from Southland Corporation of Dallas. through speedy transactions in a clean. It is to buy the Binggo stores for P130 million. (PSC) y On October 26. leasing the buildings to PSC on long term basis together with most of the capital equipment used for store operations. Binggo stores to boost PSC sales Philippine Seven Corp. Texas. i. Philippine Seven Properties Corporation ("PSPC"). y Specialized stores meatshops y Wet markets y Philippine Seven Corp. 7-Eleven today is focused on redefining and enhancing convenience through strategic initiatives designed to take advance of new technologies and merchandising processes. The incorporators were Jose T. Sibal. Philippine Seven Corp. it acquired or leased commercial properties and constructed retail store buildings. The first corporate office was located at the ninth floor of the Century Tower building in Salcedo Village. PSC transferred the Philippine area license to operate 7-Eleven stores to its affiliate.y Substitute Products: Low pressure o When it comes to this market.to provide customers an ever changing selection of quality products and services at fair everyday prices. After a month. PSC entered into a sublicensing agreement with PSPC to operate 7-Eleven stores in Metro Manila and suburbs. PSC concentrated on managing its stores and effectively took the role of a pure retailer. In July 1988..
given the high incidence of credit card ownership and easy access to the web. or any of its affiliates. use of sales representatives. Jollimart. Barclay-Elle Marge. Philippine online shopping websites have begun exploiting the potentials of e-commerce as early as 1998.. Last year. Nu Skin. many of them members of Direct Sellers Association of the Philippines. Philippine Seven booked a full-year 2003 net profit of P9.. the sales potential of the stores over a period of 10 years. In essence. This. This. 1999 to trade food. is relatively lower than the use of Internet in other Asian countries. Neways. y Direct marketing is not allowed for foreign retailers in the Philippines. High Desert. The Retail Trade Liberalization Act (RA 8762) specifically prohibits foreign retailers from selling their products outside their accredited stores through the use of mobile or rolling stores or carts. a local company formed on June 29. Not all of them had survived the competition though. its directors and officers. canned goods and other items on wholesale and retail basis. is relatively lower than the use of Internet in otherAsian countries. they are not foreign retailers. The option of using the Internet for shopping is also widely available in the country. turning around from losses in the previous three years. AC Nielsen reported that about four percent of Filipinos living in urban areas and seven percent of Metro Manila residents have access to the Internet. Avon. Amway. SaraLee. Golden Neo-Life.´ Philippine Seven told the stock exchange. Not all of them had survived the competition though. given the high incidenceof credit card ownership and easy access to the web. door-to-door selling. Last year. Philippine Seven said it has no material relationship with Jollimart. of course. The Consumer Act of the Philippines limits direct marketing to Filipino companies. and Sunrider have tapped local agents to distribute their products in the country.line facilities. providing additional details on the transaction that was disclosed last week. Encyclopedia Britannica. has signed a sale and purchase agreement with Philippine Seven. Underground Economy Grocers could potentially enter into the retail side and become microenterprises that are not covered by the census and surveys of establishments. Forever Living. American firms such as Tupperware. AC Nielsen reported that about four percent of Filipinos living in urban areas and seven percent of Metro Manila residents have access to the Internet. The option of using the Internet for shopping is also widely available in the country. These microenterprises constitute the informal sector sometimes referred to as the ¶underground economy.· This indicates that the retail trade sector might have served as an alternative source of employment for a number of . Herbalife. ³The total purchase price considered . Futurenet. of course. Philippine online shopping websites have begun exploiting the potentials of e-commerce as early as 1998. restaurants and sari-sari stores and such other similar retailing activities.3 million.
however. although they mainly cater to high-income consumers. Finally. (1995) in 1993 showed that about 94 percent of the consumers interviewed patronized sari-sari stores for food and nonfood items. with minimal if any restrictions Finally. Sari-sari store is defined as small grocery or convenient store that serves the basic food and grocery essentials of the households. Moreover. Their dominance. the well-being of the agricultural sector depends significantly on the performance of the retail industry. DIGAL : Retail Food Industry 21 anecdotal evidence. 6 Based on a survey conducted in 1996 by one of the large food retailers in the Philippines. 2000).This is primarily due to the ease of entry into this type of business. and only 22 percent patronized supermarkets. . which requires minimum capital and skills. In the Philippines. a survey by Labra et al. Convenience stores are similar to sari-sari stores and grocery stores. 7 They are medium-size stores selling a greater variety of food products and at least three times the size of sari-sari stores. There are many families in the countryside who depend on retailing as an alternative source of livelihood to augment their income. Sari-sari in Filipino means variety. theaters. is due to geographical convenience. while there appear to be minimal regulations in terms of entry to public wet markets or in operating a small family store. intimate customer service and payment flexibility (Philippine Food and Beverage Retail industry: Opportunities for Canadian Exporters. sari-sari stores mainly target consumers who buy their groceries on a daily basis and often on credit due to limited cash. However. Anecdotal evidence shows that many selfemployed and unemployed individuals venture into retailing and set up their own sari-sari stores. retailing is also an integral component of Filipinos· culture. Sari-sari stores are usually constructed as an extension of the owners house. Farm produce is brought to public markets and sold to wholesalers and retailers. It reflects the free enterprise system in action.individuals thereby alleviating unemployment. Since farm produce is an input to retail food production. the retail sector is also a major source of employment for part-time workers. the retail industry is open only to Filipino investors. However. or marketed directly to consumers. schools. especially in rural areas. and even outside large retailers where customer traffic is high. there is a move to open the sector to foreign investors. particularly students. A number of unemployed individuals also sell goods in wet market stalls or join the ranks of sidewalk vendors. This survey. as they are small in size and sell a variety of goods such as food. They are family-owned neighborhood stores selling a variety of food and nonfood items. where individuals are able to sell their goods outside churches. school supplies and toiletries. did not cover the amount of money spent on these retail outlets. as discussed below. sari-sari stores dominate the retail market as they account about 70 percent of the total.
The very first Rustan Supermarket opened in 1970 in Makati. a restaurant with a French twist. yogurts. Oui. Shopwise first opened its doors in Alabang in 1998 and now has five outlets MANILA. Although the same company owns this. We tried to combine all the fruits and vegetables for the produce. the near-impeccable layout of the shelves. o Suppliers of goods need to have innovative products to attract customers. and more mouthwatering Shopwise Alabang. after it assumed the management and operations of Rustan Supermarkets Inc. from fresh items to dry goods. a member of the Rustan Group of Companies. We ve renovated the store and strengthened a lot of areas like the produce or fresh section. Now. Meanwhile. Surely. Rustan Supercenter also operates the chain of Shopwise supercenters. Le Gourmet. complementors do not affect Wal-Mart s business model. Rustan Supermarket Another leading supermarket in the country is Rustan Supermarket. being the local franchisee of Starbucks Coffee. Shopwise puts the super in the supermarket. store manager. And now. there are 22 branches. and cheeses for the dairy section. opened at Shopwise Alabang just last year. shoppers were just so happy to discover at long last a one-stop shopping destination that s got practically everything they needed. I was simply awed by the well-lighted aisles that were so wide you could skateboard through them. assorted hordes of loyal shoppers are rediscovering an even fresher. home items. clothes. specifically. groceries. the very courteous service. coffee shops. it complements WalMart by offering the same products in wholesale form. And here s even fresher news. the careful and thoughtful arrangement of the products. Rustan Supercenter is a division of Rustan Commercial Corporation (RCC). the great variety of merchandise. Philippines When Shopwise opened in Alabang. o For the most part. 10 years ago.y Complementors: Low pressure o One complementor that exists for Wal-Mart is Sam s Wholesale Clubs. and the ice creams. which is now operated by Rustan Supercenters Inc. which is into the business of department stores and food. and not to forget. all under one roof. . more exhilarating. Shopwise Alabang gets fresher and Frenchier with its new assortment of products flown in straight from France by the company Belle France. making the company more profitable. I must confess that I was one of the first shoppers who eagerly waited outside Shopwise Alabang when it first opened its doors one November morning in 1998. you can dine and wine like the French. says George Anthony Domingo. in 2006. its maiden store in its growing chain of hypermarkets. Today. toys. the premier supercenter in the country which offers fresh goods. mostly located in Metro Manila.
What they don t know is that there are a lot of items here. Shopwise carries other imported labels from other parts of the world like the US (Springfield. veal. Italy. is only P385 and it s a good wine you won t be ashamed to give to a friend. cookies. George reveals. pate. vinegar. sells for only P2. They range in price from less than P200 to over P2. And our wines are kept at a temperature-controlled room (21°C) 24/7 to keep the quality of the wines. peanuts. cereals. ice cream cakes. And we have a lot of products that have no comparison we re the exclusive distributor in the Philippines of Belle France products. VP-marketing. cornflakes. ratatouille. quiche lorraine. coffee. Inc. coffee filter. lasagna. for instance. Le Gourmet is like a specialty store within a store. A lot of times. George assures shoppers. which we call fine finds. For example. frozen paella. Cassou what? Fret not just because you can t pronounce these tongue-twisting French names doesn t mean you can t afford them. Australia. turkey. imported cheeses.185 at The Vineyard.It can t get any Frenchier than this: Belle France flies in hundreds of French products to Shopwise Alabang which include. hold your breath now: muesli. which normally costs P3. Frances notes. pizza. a Veuve Chabert. mayonnaise. ready-to-fry and enjoy confit de canard (cured duck meat poached in its own fat). our wines. We have a nice Chilean table wine that s only P195. or exciting products from all over the world that are offered at very affordable prices. For instance. Did we forget something? Of course. People think of Shopwise as a place for one-stop shopping for all their basic needs. and South Africa. Rustan s Supercenters. sausages and lentils.000 for the champagnes that would cost twice as much in other wine stores. Spain. tea. chicken. Our Bordeaux. Spanish hams. etc. our French products are 40-percent cheaper than comparable brands. With all the French ingredients and condiments available. Chile. Frances tells us as she walks us through The Vineyard of Shopwise Alabang. ice cream. you can whip up a gourmet feast at home and imagine you re dining in a bistro in Paris. ready-to-bake cakes. cheeseburger. . are 50-percent cheaper. You don t have to go to a specialty store to get your special sausages. there are the French wines. french fries. During our store anniversary. baking powder. chocolates. says wine lover Frances Yu. Since we get our products straight from the producers without having to pass through middlemen. the French are superior so they can never go wrong with French wines. crepes. cassoulet (white bean stew with meat). and of course. especially the French wines. People know that when it comes to wine. we had a buy-one-take-one promo for cabernet sauvignon and merlot for only P195. duck terrine. The Vineyard houses an intoxicating selection of wines from different parts of the world like the US. available at prices that are 40-percent lower than national brands. among others). The Vineyard promises to be the toast of the town. olive oil. marmalades. soup. couscous.000 plus.
800 pieces of bread a day. We don t have just affordable imported products. A lot of the dough-licious bread/pastry recipes come from Divina Couvreaux. too. says George.. where high on the list of favorites are the organic. apple strudel. Surely fast sellers are the products in the Sure Buy section. whole wheat mini baguette. cream of chicken pan de sal. you can get your breads hot and fresh. sugar-free. bread pudding. pizza baguette. Say hello to a new. mushroom turnover. and ready-to-assemble. ham/pineapple roll. we ll be carrying cell phones. we have combined all the rugs. or what we call RTA. We re baking some 1. coffee/raisin bun. or should we say baking. and low-carb items. Bon appetit! And for homemakers. The promo features anywhere from 500 to 1. actually for everybody because who isn t cost-conscious these days? It s our private label that includes products from paper to plastic to food. ham bread. electricals. appliances. says Frances. You ll just love (as much as we do) the crusty oatie bread. walnut pie. Here. 2005) (robles. Head off to the new furniture section of Shopwise Alabang. there s a buy-one-take-one promo on the comforters. multi-grain bread. & da silva. don t just sit there.We re also developing an imported frozen aisle where we have Wagyu. and you ve got your instant lunch or dinner. Says Frances. potato curry delight. there s food-to-go at Shopwise.000 products on sale at up to 70-percent off. we also have Sure Buy for those who are on a budget. creamy cheese delight. Inc. the breads and pastries that are baked in the store that s got two giant ovens! We bake not just in the morning but three times a day so that whatever time of the day you drop by. Shopwise s smart shoppers also save big during the store s 10-day promo held twice a month. pork/chicken empanada. George shares more beefy news. And soon. for instance. trying times?). fresher. For those on the go (and who isn t in these frying. hotdog in a bun. tuna pan de sal. onion/bacon roll. at Shopwise? But of course. sheperd. tuna turnover. a walking encyclopedia of Shopwise facts and figures. chief operating officer of Rustan s Supercenters. and the list goes on and on. items. wife of Christian Couvreaux. asado pan de sal. carpets. George enumerates. We have our hardware section. and Frenchier Shopwise Alabang! (Shepherd. low-fat. Aussie beef. Shopwise has something for the health-conscious. where a lot of items are now on sale. and home decor. The couple shares a passion for good food. What else is cooking. too and it s called Simply Healthy. etc. 2005) (chen. This is something you really want to look at in times of economic crisis like now. For instance. corned beef pan de sal. in our gadgets section. but they re of comparable quality. This brand is about 20-percent cheaper than the leading national brands. Bring home or to the office a roast pork belly or a chicken a la kiev or a cream dory. er. open garlic bread. 2009) .
& da silva. robles. rome: FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS. w. d. rome: FOOD AND AGRICULTURE ORGANIZATION OF THE UNITED NATIONS. A.S. philippines :retailing Industry. 2008. Department of Commerce. Changes in food retailing in Asia. Department of Commerce. U. chen. The implications of supermarket development for horticultural farmers. & da silva. c. philippines :retailing Industry. a. Rome: Agricultural Management. (2005). (2009). (2005). k. a.. Marketing and Finance Service . Marketing and Finance Service . W. . d. The implications of supermarket development for horticultural farmers. sheperd. U.chen. Shepherd. k. (2005).S. w. (2009). FAO.. robles. sheperd. Shepherd. Changes in food retailing in Asia. W.. FAO. A. Rome: Agricultural Management.. c. (2005). 2008.
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