When money comes, shopping too follows (The Brunei Times)

Published in the December 30, 2010 issue of The Brunei Times

BANDAR SERI BEGAWAN

Jennee Grace U Rubrico

Thursday, December 30, 2010

WHEN people start going back to buying luxurious little pleasure items, one can safely conclude that the worst is over for the economy. While the stock market is officially the weathervane of a mature economy, the movement of discretionary items like branded bags and electronic gadgets in the retail sector is, arguably, the better indicator of economic health.At the first sign of an economic slowdown Jimmy Choo and Tiffany are among the first names to be taken out of the shopping list, ceding their slots to more wallet-friendly brands; when purse strings are loosened, austerity fatigue somehow finds its way into the household and items that feel good but are not vital for survival are reinstated in the budget.
Given the way people in this part of the world have been spending of late, the region doesn't seem to be worried about the eurozone debt crisis at all.
In its 2011 outlook for the Retail and Consumer Products in Asia, PricewaterhouseCoopers predicts the region will outperform all other markets in terms of retail sales over the next four years.
Figures from the Economist Intelligence Unit quoted by PwC estimate Asia-Pacific's retail sales volume to grow 6.5 per cent in 2010, from 5.6 per cent in 2009. Between 2011 and 2014, growth will be between 6 per cent and 6.6 per cent. In contrast, other markets in the world are expected to grow -0.5 per cent to 5.2 per cent in 2010; 0.2 per cent to 4.5 per cent in 2011; 0.8 per cent to 5.2 per cent in 2012; 1.1 per cent to 5.8 per cent in 2013; and 1 per cent to 6.6 per cent in 2014. Western Europe is expected to consistently lag all the other regions.
"Asian markets proved remarkably resilient through the economic downturn and continued healthy growth over the next five years looks almost certain," says PwC.
It adds that while China and India will continue to drive growth in the region, "across most of Asia, the forecast is for steady growth in the mid-single digits". Shoppers and mall operators in Brunei, Kuala Lumpur, Manila, and other cities in the region which saw shopping centres bursting at the seams during the Christmas season would be hard-put to argue.
Food and fast moving consumer goods always do well regardless of the economic condition, since they are necessary expenses.
But to get a better sense of the economic vitality of the region and the public's propensity to trade up in good times, it is necessary to turn to retail subsectors that are dependent on spare money: luxury goods, durables and electronics.
The segments have been growing in leaps and bounds. Spending on luxury goods is "back in a big way" this year, says PwC. Watch maker Swatch, which also owns the Blancpain and Breguet brands, saw a 22 per cent increase in first half sales, PwC notes.
Sales in Hermes International also saw a 27 per cent jump in the second quarter and a whopping 57 per cent increase sales in Asia, excluding Japan.
"LVMH, the world's biggest luxury goods group, said its profits soared by 53 per cent in the first half of 2010", while Richemont, which owns the Cartier and Montblanc brands "saw its sales in Asia rise 51 per cent year-on-year from March to August", PwC states.
Durables and electronics are also seeing a jump in sales volume in the region - to 5.5 per cent in 2010, from 2.7 per cent in 2009. The segment is also expected to grow 5.8 per cent in 2011, 6 per cent in 2012, 6.4 per cent in 2013, and 6.6 per cent in 2014.
By all indications, Asians are poised to shop their way to economic health. But economics is hardly an exact science, and at the back of policymakers' minds is the question: Will Asia continue to be insulated from the European debt crisis?
Studies claim this is a likely scenario. Realistically, people are still drawing up shopping lists and keeping to budgets, albeit much bigger ones.
As long as the good times roll, however, shoppers will continue to kick off the flea market shoes, don the Havaianas, and hit the high-end stores to make big-ticket purchases.
Because when money comes, shopping is never too far behind.
(The views of the author are her own and do not necessarily reflect those of The Brunei Times).
The Brunei Times

Call centers seen leaving Makati (BusinessWorld)

Published in the January 17, 2007 issue of BusinessWorld

By JENNEE GRACE U. RUBRICO, Sub-Editor

Call centers seen leaving Makati

Contact centers could begin moving out of the Makati Central Business District in two to five years as rents continue to escalate and qualified labor increasingly becomes a constraint, experts said.
Property analysts polled by BusinessWorld said cost-sensitive call centers may start their exodus when office rents go beyond a historical high of P1,000 per square meter.
But Makati’s loss will be other cities’ gain, as these call centers will likely relocate in alternative business districts, they added.
"A lot of call centers and support services type of operations ... got favorable rents [when they came in after the Asian financial crisis] and then suddenly, rates will be doubling. These guys are natural candidates [for leaving]," said David Young, managing director of Colliers International Philippines.
"They don’t need to be in the best quality buildings in Makati, they can happily function on any location in Manila as long as infrastructure services get to them."
Mr. Young said he sees these firms leaving the central business district in two to five years because lease contracts usually run this long.
In its third quarter 2006 market report, Colliers said premium grade space in the Makati CBD hit P798 per square meter per month, approximating early 1996 levels. It also predicted that by this year, office rental in the business district will breach P1,000 per square meter per month, the going rate just before the 1997 Asian financial crisis.
Four years ago, rental rates were at P350 per square meter per month, Asian Institute of Management Professor Danilo A. Antonio told BusinessWorld.
Call centers, the property analysts said, could transfer to cheaper business districts like Eastwood in Quezon City, Fort Bonifacio in Taguig, Filinvest in Muntinlipa or the periphery of Makati if their only concern is high rent.
If the concerns are expanded to include labor shortage, they will be looking at other areas in the region, said Paul Ryan L. Isip, associate director for global corporate services of CBRE Philippines
"This [labor] is a constraint," he added.
Even if costs escalate, however, a few call centers will remain in the central business district, experts said.
"Call centers might just stay [in Makati] since moving costs can be too high," Mr. Antonio said.
Mr. Isip said some outsourcing companies will stay "as not all outsourcing companies have the same cost structure."
But Makati, said Business Process Association of the Philippines president Danilo Reyes, is still the place to be for contact centers that want to establish their presence.
"Some will stay because they need to have presence while others will go once their rents double up," he said.
Colliers Research director Richard Raymundo also said that while P1,000 per square meter per month is a historical high in peso terms, this does not approximate 1997 rental rates in dollar terms.
"The dollar is now around P50. In 1997, it was at around P26. You will not go back to those rates. So rental rates are still much cheaper now if you consider it in dollars," he said.
Analysts said the vacancies resulting from the transfer of call centers will be taken up by multinational firms that want to either establish a presence in the country or expand current operations.
"At the same time that [call centers] are coming under cost pressure, we are seeing a general increase in demand for space other segments of the office market. Commercial services and the banking industry are doing well, and companies to support these industries are doing well," Mr. Young said.
He also noted that multinationals are "looking to put back office functions" in the country.
"Technically, this is business process outsourcing. We’re seeing that demand from multinationals," he added.
Mr. Young also said demand for space not necessarily in the Makati central business district is also coming from call centers abroad.
"It’s not just jobs in America, Canada, Europe. There is incredible interest in India. Traditionally, Bangalore has been the hub for call center business. Bangalore is now coming under cost pressure, they’re coming under labor constraints so we’re seeing companies operating in India now looking to the Philippines to secure their needs," he said.

Consumer optimism up; economy less of a worry (BusinessWorld)