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Business

Global retailers making their way to Philippines' smaller cities

MANILA -- Time goes slowly on the southern Philippine island of Mindanao. Unlike Manila, there are no skyscrapers, even in Davao, its largest city.

     Against this sleepy backdrop, the sprawling SM Lanang Premier shopping center is more than a little conspicuous. Located in the city center, the facility accommodates numerous big-name tenants, such as U.S. clothing chain Forever 21. 

On the rise 

What do these retailers see in Davao? A consumer market on the verge of taking off.

     Companies from around the world are increasingly turning to the Philippines for their business process outsourcing, or BPO, needs. English is one of the country's official languages, making it an ideal provider of such services. The Philippines has overtaken India as the world's largest market for call center operations, for instance.

     Western business hunting for cheaper labor began looking to smaller cities, eventually settling on locations such as Davao. The arrival of BPO jobs has raised young people's income, and this, in turn, has boosted consumer spending.

    In Davao, this stronger consumption is attracting foreign retailers. Fast Retailing, the operator of Japanese clothing chain Uniqlo, plans to open a store on the island of Cebu this year, and one in Davao could follow.

     "We are looking to open a Uniqlo store in Davao, probably next year," said Katsumi Kubota, chief operating officer of Fast Retailing Philippines, a joint venture between the Japanese retailer and an SM Group company.

     The partnership launched its first Uniqlo store in the country in 2012. As of the end of May, it was operating 23 Uniqlo outlets, mostly in SM Group shopping malls. That is the same number as in Singapore and Thailand, where the Japanese retailer has been doing business longer.

     By 2020, the company aims to have as many as 200 stores in the Philippines. Success in outlying areas, including Mindanao, will be key to achieving that goal.

     Decades of armed conflict between the government and Islamic rebels hampered development on Mindanao. Since last year's peace agreement, however, the island has been gradually recovering and could one day become a major consumer market.

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