Convenience stores on rise in Philippines
By Laif Meidell, CMT, president of American Wealth Management, and portfolio manager of the AdvisorShares Meidell Tactical Advantage ETF (MATH)
Each week, dozens of economic reports are released that help investors gauge the strength of economies around the globe. Although a little offbeat, today we’ll take a look at convenience store growth as a possible measure of the health of a country’s economy. Why convenience stores? Well, the wealthier we feel, the more likely we are to pay the higher prices for items in a convenience store, versus waiting to buy them cheaper somewhere else. Also, with 83.7 percent of convenience stores selling motor fuels, we tend to buy more gasoline and drive more during good economic times as well.
According to the National Association for Convenience Stores, the convenience retailing industry in the U.S. has nearly doubled in size over the past 30 years, from 80,900 stores at the end of 1983 to 151,282 stores by the end of 2013. With the U.S. Census Bureau estimating the U.S. population at 317 million people at the end of 2013, it means there are roughly 2,100 residents for every convenience store. In 2013, the number of convenience stores in the U.S. grew by 1.4 percent (2,062). However, a review of the annual number of stores each year reveals that it’s not a recession-proof industry, and that stores close during bad economic times and new ones open during good times.
Population is only one variable in the convenience store equation. The other is the amount of money the average person makes in a year. Some countries such as the Philippines, whose average wage in 2013 was $3,270, have watched their incomes triple over the past 10 years, a 30 percent annual pay increase each year.
For example, Filipinos have benefited from the thriving outsourcing sector, where it’s estimated that roughly 1 million workers are employed. These workers are drawing good salaries, taking calls from Europe and the U.S. 24 hours a day. However, when it comes to convenience stores, the Philippines has the lowest ratio in the East Asian market, with only one convenience store per 40,917 people. Contrast this with other countries in the region such as South Korea, where the ratio is one store per 2,060 people. Convenience store chains are taking notice of the growing prosperity throughout the Philippines. Just 18 months ago, there were only two convenience store chains in the entire country, 7-Eleven and MiniStop. Today, there are seven, with aggressive plans to double the number of stores from 2,000 today to 4,000 in four years.
This week, the Philippines is No. 2 on our performance list, with the MSCI Philippines Investable Market index gaining 2.5 percent over the past five days. In the top spot this week is the MSCI Thailand Investable Market index, higher by 3.23 percent over the same period.
This commentary originally published in the Reno Gazette-Journal. Performance numbers used in this article were obtained through eSignal and are not guaranteed to be accurate.