Retail executives and industry experts warned that the Philippine retail sector risks falling behind regional competitors unless companies shift their focus from rapid expansion to operational productivity.
The issue was discussed during the Retail Asia Summit Philippines 2026 held at Shangri-La Makati, where industry leaders highlighted structural challenges ranging from logistics costs to outdated operational systems.
Despite continued store expansion across the country, many retailers remain constrained by inefficiencies in supply chains, fragmented technology systems, and rising labor pressures.
Expansion Outpaces Efficiency
Panelists noted that the Philippine retail industry has traditionally measured success through store expansion and sales growth. However, these metrics alone no longer reflect true competitiveness.
Louella Scott, General Manager of Vogue Concepts and chair of the Philippine Retailers Association NRCE, pointed out that the country’s retail landscape remains highly fragmented.
There are roughly one million sari-sari stores nationwide, compared with only about 7,000 combined outlets from major convenience store chains such as Alfamart and 7-Eleven.
Whilst expansion has broadened market reach, operational productivity has not improved at the same pace. As a result, Philippine retailers now face structural disadvantages compared with regional peers.
Logistics Costs Remain a Major Constraint
One of the most significant challenges facing the sector is logistics.
Jason Ocampo, AVP for Technology at National Book Store Group, noted that logistics costs in the Philippines consume about 27.5% of GDP, far higher than in neighboring economies such as Thailand (11%) and Indonesia (14%).
Infrastructure gaps, traffic congestion, and complex distribution networks further increase the cost of moving goods across the country.
These structural issues make supply chain management more difficult and reduce overall efficiency.
Fragmented Systems Slow Productivity
Retail executives also highlighted internal operational challenges that limit productivity gains.
Many companies still operate with fragmented legacy systems where key operational functions—such as inventory management, procurement, and logistics tracking—are not fully integrated.
“As compared with our ASEAN peers, many local retailers are still operating with fragmented legacy systems,” Ocampo said.
Without integrated systems, companies often rely on manual processes to coordinate stock levels and deliveries. To avoid stock shortages, many retailers maintain higher safety inventory levels, which increases operating costs.
Connectivity issues also affect operations.
Scott noted that not all retail branches have consistent access to centralized systems or cloud-based platforms, which limits real-time visibility across store networks.
Labor Shortages May Accelerate Automation
The tightening labor market may become an unexpected catalyst for modernization.
Mark Uy, Group Head of Strategy and Business Development at Ayala Corporation, said retailers are finding it increasingly difficult to recruit and retain workers.
However, this pressure may push companies to adopt more automation and technology.
In highly automated warehouses overseas, robots handle physically demanding tasks such as lifting and sorting, whilst workers supervise operations and manage systems.
“That doesn’t mean people lose their jobs,” Uy said. “People transition from being cargo handlers to operating robots.”
Technology Could Help Retail Leapfrog
Despite the productivity gap, industry leaders remain optimistic that technology could allow Philippine retailers to catch up more quickly than expected.
Advances in artificial intelligence, digital platforms, and integrated logistics systems could accelerate operational improvements.
“We may be decades behind,” Uy said. “But because of technology, that decade behind can be made up in a year.”
Still, executives stressed that closing the gap will require a shift in mindset.
Instead of focusing solely on expansion, retail leaders must begin asking deeper questions about operational efficiency, return on investment, and supply chain integration.
“Boards should not just ask how many stores you opened,” Ocampo said. “They should ask what the return on investment is for that store.”
Total Experience Matters
Beyond operational efficiency, another key theme at the summit was the importance of creating a “total experience” for customers, employees, and partners.
Marnelli Eileen Fullon, Customer & Growth and Innovation & Experience Design Leader at SGV & Co., said companies often focus heavily on customer experience whilst overlooking employee and partner relationships.
However, disengaged employees and weak partnerships can undermine the entire retail ecosystem.
She noted that around 70% of employees feel disconnected from their company’s purpose, which can lead to high turnover and rising recruitment costs.
“Everyone in the company, particularly executives, should think about employees just as much as customers,” Fullon said.
Strong partnerships are equally important. If suppliers or merchants are not profitable, the entire brand ecosystem can suffer.
“When employees are engaged, partners are empowered, and customers are delighted, our businesses thrive,” Fullon added.
Digital Consumers Are Reshaping Retail
Executives also highlighted how Filipino consumers are driving the shift toward omnichannel retail.
Roderick Leong, Country Manager of Heineken Philippines, said Filipinos spend about 25 hours a week on their phones, reinforcing the country’s reputation as one of the most digitally connected markets in the world.
At the same time, Filipino culture remains deeply social. Digital platforms often amplify real-world interactions rather than replace them.
Yassine Bakkari, Managing Director of L’Oréal Philippines, said brands are now deploying AI-driven personalization tools such as virtual makeup trials, beauty coaching, and skin analysis to engage consumers online.
Online beauty sales in the Philippines, he added, are growing five to six times faster than offline channels, with more than half of makeup sales already occurring online.
However, executives cautioned that digital reach alone is not enough.
Brands must combine technology with authenticity and community engagement.
“Digital allows us to reach millions of Filipinos,” Bakkari said. “But consumers reward brands that use technology to be authentic and relevant.”
