WHEN one speaks of “Retail,” we often picture bustling malls filled with people carrying bags of merchandise from known and emerging brands. Nowadays, this isn’t the reality. Given the strict enhanced community quarantine (ECQ) guidelines and stringent physical distancing measures in place, our malls resemble ghost towns.
The economic impact of this pandemic is undeniably glaring in the retail sector. Sans the existence of a vaccine, realistically, retailers cannot do business like they used to.
For retailers that are heavily affected, it is imperative to seek solutions that take into account short, medium and long-term goals. For starters, the Philippine government, through the Bayanihan to Heal as One Act, seconded the Department of Trade and Industry (“DTI”) to issue regulations providing relief to affected businesses. Looking beyond, retailers can learn, and possibly adapt, the industry’s best practices involving e-commerce.
In the short-term, retailers should manage business losses while maintaining some form of liquidity to revive the business disrupted by the pandemic once the country transitions to a general community quarantine (GCQ). To aid this transition, DTI issued Memorandum Circular No. 012-20 or the Guidelines on the Concessions on Residential Rents and Commercial Rents of MSMEs addressing the financial distress of commercial establishments that were forced to cease operations during the ECQ. The Circular provides that there shall be a minimum of 30 days grace period on commercial rents within the period of the ECQ. Further, the payment of these rents falling within the ECQ period shall be paid in six equal amounts following the end of the ECQ and will be added to the rents due on those succeeding months.
Lessors may also extend greater concessions like a total or partial waiver of rent during the ECQ, discounted rent after ECQ, and renegotiation of the lease agreements. MSMEs who request for assistance from their respective lessors shall provide supporting documents showing the business losses caused by this pandemic. It is worth mentioning that SM Group of Companies, Ayala Group of Companies, and Robinsons Land Corporation extended relief packages to their mall tenants by waiving rental fees during the ECQ.
Note that relief from payment of rent due to a “force majeure” event can only be availed if such a relief is explicitly provided under the lease agreement. Generally, lease contracts excuse the lessees from payment of rent during a force majeure event if there is a damage or destruction of property leading to the unavailability for use by the lessee and they do not provide blanket waiver from payment of lease rentals on occurrence of every force majeure event. As force majeure is a contractual right, the express wordings of the clause has to be carefully assessed and the lessee cannot, as a matter of right, invoke non-payment due to a force majeure event in the absence of a supporting clause.
To combat this economic slump, Secretary of Finance Carlos Dominguez III disclosed a P1.17 trillion response plan. This includes the COVID-19 Pondo Para sa Pagbabago at Pag-Asenso Enterprise Rehabilitation Fund (P3-ERF) which is a special financing program for affected MSMEs. Furthermore, the Bangko Sentral ng Pilipinas (BSP) slashed interest rates to an all-time low of 2.75 percent on loans granted to affected businesses.
In the likely event that physical stores are allowed to reopen, retailers should remember to keep their customers and workforce safe.
Recently, the DTI, together with the Department of Labor and Employment (DOLE), issued the Interim Guidelines on Workplace Prevention and Control of COVID-19. The DTI and DOLE imposed safety and health standards in all workplaces such as the wearing of facemarks prior to entrance; regular cleaning and disinfection of frequently handled objects; and measures to minimize contact between clients and workers. The goal of this regulation is ultimately to adopt contactless transactions. In addition, the DTI issued Memorandum Circular No. 20-22 identifying the business establishments allowed to operate under ECQ and GCQ.
But one has to acknowledge that these are stop-gap measures aimed at preventing an economic collapse. To keep business afloat, retailers must focus on long-term approaches taking into account the “new normal.” Majority of business analysts agree that a strong online presence can help businesses ride through a pandemic.
In the Digital 2020: Global Digital Review released by We Are Social and Hootsuite, they found that Filipinos spend the most time online averaging nine hours and 45 minutes per day. This affirms the Philippine E-Commerce Roadmap for 2016-2020 launched by the DTI that highlighted the young, internet savvy population to be at the core of thriving e-commerce in the country. Now, more than ever, retailers should capitalize on growing internet usage during the pandemic by engaging customers via popular social media platforms like Facebook and Instagram.
The COVID-19 pandemic, albeit troublesome, should not signal the doom of a retail business. Time and time again, Filipino resiliency and innovation is the backbone of our growing economy. For now, retailers must tighten their belts and adapt to new business ideas to survive this pandemic.
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ATTY. MARK S. GORRICETA is the Managing Partner and head of the Corporate Group of Gorriceta Africa Cauton & Saavedra www.gorricetalaw.com. He is a well-recognized expert in the fields of Capital Markets, Securities Law, Mergers & Acquisitions, Technology Law and Real Estate./PN
