Francorp - The Franchising Leader in the Philippines
Francorp - The Franchising Leader in the Philippines

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Retail Franchising Q&A

Francorp Consultants share their insights into Retail Franchising Trends for 2016

  1. Based on industry statistics, why are retail franchises lagging behind food and service franchises?
  • In majority of countries, food franchises have always been a large part of the industry as Food concepts tend to adopt franchising earlier. In addition, franchisees tend to gravitate first towards food, partly because of the continuous demand for food, but also the pride of having your own restaurant or F&B establishment.
  • Retail and service franchises tend to be adopted as the 2nd wave once franchising is established in the market. In the Philippines, Retail is actually a large part of the industry at 34%, and is the 2nd largest. This has increased from just 28% in 2011. Although franchising in terms of apparel is slowing down due to the large influx of foreign concepts that enter through JVs or wholly owned subsidiaries, the retail segment  continues to grow due to the entrance of new convenience store players and pharmacy concepts. In fact, new concepts in retailing such as the Agri franchise focused on retailing to farmers and Holcim Hubb Builders Center focused on people constructing homes have also been entering the market and growing.
How to Franchise Your business | Franchise Seminar 2016

Retail brands continue to expand through franchising.

  1. What are the biggest benefits, opportunities, and challenges of going into retail franchising?
  • Retail franchising has the advantage that inventory does not spoil. Even in fashion where seasons change, you would still be able to sell your products even after a few years (albeit at a discount). In addition, retail franchises tend to have fewer staff vs. food franchises allowing you to focus your training and really focus on building a few key people in the organization.

 

  1. What would be the financial and physical requirements for going into retail? How about manpower requirements?
  • Financial requirements range widely from kiosks that can be opened at around Php 300k, to  small scale Pharmacies at Php 700k to bigger retail stores that range from 2M upwards. The manpower requirements also range from 2 people up to dozens depending on the size.

 

  1. Is retail franchising still worth getting into 2016 and beyond?
    • With increasing competition in food from both big local and international players, franchisees should look into retail franchises as a good opportunity in 2016 and beyond. The secret is in choosing the right categories to enter. Pharmacy franchises still have a lot of room for growth, but with a lot of competition, franchisees need to choose the right locations, most likely in provinces and 2nd tier cities where the density may not yet be as high. There is also the Agri Franchise that serves an underserved segment in the market – farmers.
    • In fact, I have personally invested in a retail franchise called the Paper Stone from Singapore, focusing on selling the cutest, liveliest and trendiest stationary and paper goods. The competitive advantage of the store is that new designs are developed every week to help customers keep coming back. We are very optimistic with the growth of the retail franchise segment as we aim to have 9 stores by the end of the year, after only 1 year of operations, and more in 2016.
  1. What would it take for its number to grow? Meaning, how can we further boost retail franchising as a segment?
  • Retail franchising is very robust and continues to grow. But to further grow the segment, new players and retail categories have to enter. In recent times, we have noticed that a lot of manufacturers & distributors have been entering retail – from Agri, Holcim and The Generics Pharmacy. We see this trend continuing with more manufacturers using franchising to gain scale in the retail space.
  • In addition, with more competition coming in, retailers have to raise our global competitiveness in terms of branding, quality of products and support in national and international expansion efforts

 

  1. What are the retail trends for 2016 and beyond? And how can existing and would-be retailers better cash in on these trends?
  • On an operational side, there will be more Technology-driven developments: Mobile payment solutions (Beep card), POS technology – POS leads to better conversion rates due to less queuing in stores; Apps, 3D printing – to help customers try out custom-made items before purchasing; shift to opening new online channels with players such as lazada, pocketmarket and tackatack making it much easier to open online stores.
  • Good corporate citizenship – consumers will patronize businesses with sustainable CSR programs or are known for ethical business practices
  • Further beyond 2016, I foresee online merchants expanding into offline selling.  Majority of retails sales, after all, are still offline. Zalora has started to experiment with this with their pop up stores in HK, Singapore and recently in Shangrila Mall. 

To learn more about how to franchise your business both in the Philippines and internationally, contact a Francorp franchise consultant or take a free franchisability quiz.