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Cover Story
SM Success via the
‘Middle’ way


Mention the word ‘SM’ or ‘Shoemart’ in the Philippines, and you will hear Filipinos from all ages, income groups and backgrounds hailing it as their favourite shopping haunt. In this exclusive interview with Teresita Sy-Coson, president of Shoemart Inc, Suzanne Loh discovers the many reasons for its continued success.

ShoeMart, or better known as SM, is synonymous with ‘shopping’. But what makes SM stand out above the rest as a true Filipino retail icon? Is it the wide merchandise mix and price points, store locations and ambience, and good brand positioning?

Teresita Sy-Coson, president of Shoemart Inc, confirms all these to be so.

Indeed, all these factors have come together in varying degrees to fulfil the central objective of SM — that is, to treat every consumer in the Philippine retail market as a potential customer!

However, the prime reason for SM being the darling of consumers all over the Philippines is that the management takes the efforts to identify their needs and goes about systematically fulfilling them.

And, being mindful of the state of the country’s economy and standard of living, the founder and current management decided to choose the ‘Middle’ way.

Says Sy-Coson: “We chose to focus on the ‘Middle’ class in terms of value and prices, as it makes it easy for our stores to adjust prices either upwards or downwards.

“Taking the middle road allows us to serve a broad market base — from the upscale to the mass market — with a lot of flexibility.”

SM has made it a point to study the family unit as a basic grouping of individual needs and how its department stores, supermarkets, hypermarkets and speciality stores can cater to their various needs.

“We want to provide a practical but unique shopping experience to the whole family, so we have broken the family unit into man, woman, teens and/or children to study their specific needs,” says Sy-Coson.

By conducting such indepth studies, SM is able to meticulously target its customers with what they want. This is one of its core strategies in becoming the country’s top retailer.

SM has just about everything for its customers — apparel for every family member; health & beauty products for women; hardware for men who shop for gadgets to do simple fit-outs for the home and, of course, houseware for the family.

One of its in-house studies shows that almost 40% of the Philippines’ population are under 19 years old. Thus, SM today has a string of Toy Kingdom stores for children of all ages as well as Baby & Co outlets for infants.

SM looks very carefully at the price points of its products vis-a-vis its target consumers. “The safest way,” says Sy- Coson, “is still to target the ‘Middle’ market.”

On the whole, SM’s wide merchandise mix and competitive price points are helped by a positive working relationship with more than 2,000 suppliers, aided by a highly efficient supply-chain management system.

She adds: “We have a big IT department that supports our inventory management from the front-end to the backend with advanced retail IT programs. Altogether, we spend US$10 million annually on our supply-chain initiatives.”

Besides offering value-for-money shopping, SM is also mindful of the auxiliary needs of its shoppers.

For example, it is one of the very few retailers in the Philippines that provides a wide array of payment services within its stores. Its SM Foreign Exchange Service is also a boon to overseas- based Filipinos coming back to the country for short holidays.

Marrying local with foreign trends

Faced with a pool of customers whose profiles have remained relatively the same over the years, evolution rather than revolution of its merchandise de-velopment has become the way to go for SM to sustain their interest. But it still have to create something fresh and appealing regularly.

“Many of our shoppers are regulars who visit our stores at least three times a week. As they are here so often, we need to give them something fresh and entertaining all the time,” says Sy-Coson.

This being the case, SM changes its merchandise as often as every month to satisfy its customers’ ever-changing tastes. For instance, house brands are given a makeover when they either fail to meet sales targets or catch up with changing consumer trends.

A case in point is the Ladies Circle label for women’s apparel, which was eventually changed to ‘Plus Size’ to accommodate more sizes for women of larger built.

SM also monitors fashion trends from abroad and localise them to suit the domestic market.

This has been so since SM’s founder Henry Sy Sr, as an enterprising young man 47 years ago, began to infuse American culture into his first Shoemart store. Selling quality shoes from the US, Sy went on to start its first Shoemart store in 1958 — modelled after a shoe store in the US.

Sy went on the expand his shoe store chain in the 1960s, and was one of the pioneers in the business and commercial districts of Makati and Cubao.

Over the years, the US continues to be an inspiration for SM’s fashion lines in the Philippines. Indeed, the American influence has remained dominant largely due to the country’s colonial history and fashion trends brought back by returning Filipino expatriates from the US, especially from California.

For instance, the Bohemian look marked by its outlandish styles, layers of fabric and accessories — is now in vogue and SM department stores are highlighting it … but with some modification.

“We’re simplifying this fashion concept according to our consumers’ taste, lifestyle and budget. This is important because many of our shoppers need light clothing to travel by public transport while others are still not fashionforward enough to adopt the Bohemian look wholesale,” says Sy-Coson.

Many of the non-fashion retail offerings of SM stores are imported from Asian countries such as China, Hong Kong and Bangkok. SM’s shoppers are now exposed to the quality and value of China-made products in particular, as the bulk of its merchandise are imported from the world’s largest manufacturing country.

With 60% of its merchandise coming from overseas, SM’s retail offerings exude a cosmopolitan feel.

One of its main selling points today is more stores, more merchandise and more price points, giving today’s consumers the very best in their shopping experience.

According to statistics from the Euromonitor International’s 2003/2004 Asia-Pacific Retail Market Report, the SM Group ranked first out of 15 leading retailers in the Philippines; its retail turnover increased from 57,307 million pesos (US$1.06 billion) in 2002 to 60,779 million pesos in 2003.

SM’s department stores registered more than 40 billion pesos in sales in 2004. Last year’s combined revenue for the retail group — the department store and affiliates — was 80 billion pesos.

Not wanting to rest on its laurels, SM continues to create new retail formats and fine-tuning them to meet the needs of its customers. For instance, in its hypermarket development, it has adopted an ‘Asianised’ concept to cater to Asian preferences for value-formoney products.

Indeed, the mushrooming of new business formats and speciality stores is no accident; it is a carefully planned strategy by SM to capture both the general and niche markets in the overheated retail business in the Philippines.

Over the past two decades, SM has gradually expanded its retail offerings beyond its department stores and supermarkets to speciality stores called ‘retail affiliates’.

These retail affiliates, focusing mainly on non-food items like toys, baby products, sportswear, houseware and furniture, complement one another and SM’s department stores. While SM Department Store provides everything for everyone, these retail speciality stores are designed to serve niche markets — customers willing to pay a premium for more upmarket brands.

SM has also embarked on a franchise arrangement with US-based Ace Hardware, and a joint venture with Hong Kong-based Watsons to expand its retail offering in the hardware and health & beauty stores.

“Having global partners has enhanced SM’s merchandise selection, giving us access to merchandise exclusively carried by these stores. It has also enhanced our store design, marketing and service,” says Sy-Coson.

Location, location, location

The malls developed by SM, with all its retail affiliates and department store housed strategically within each building, also provide a wholesome and exciting shopping experience for its customers.

“We make it a point to locate SM stores within our own malls as this helps to accentuate the SM brand in a big way with the parallel identification between the stores and malls,” says Sy-Coson.

Many of the SM department stores, supermarkets and hypermarkets are usually located in malls that are in highly populated centres, attuned to family oriented lifestyles.

On the other hand, speciality stores such as SM Appliance Center, Toy Kingdom and Baby & Co thrive comfortably in upscale malls like the Podium at Ortigas, Manila, attracting young professionals from offices and upmarket residences.

To offer today’s customers experiential shopping, SM also invests in small and bigscale renovations of its stores.

“SM undertakes renovations from time to time to help it pull in more customers and excite them with new perspectives of its stores. We always consider foreign design trends and customer preferences when we want to renovate our stores,” says Sy-Coson.

Most of SM’s store interiors are conceptualised by foregin architects and designers, who would determine fixtures and fittings most approporate for the designs.

For instance, in the the newly renovated SM Makati store, graphics were designed to be bold and modern, as well as friendly and inviting. While the store incorporates materials like natural stone and rich wood details, it also features Mondrian-like patterns as a motif in its architecture.

The designers have also added a concourse area to link up the SM department store and its supermarket. This makes for a bolder SM presence as customers walk in from the MRT station into the store.

Merchandise hotspots in the middle of the aisles also help to create an exciting merchandising impact as one walks through the store.

Future milestones

Looking ahead, SM is optimistic that the future will be better and brighter times as the Philippine economy picks up. According to the Euromonitor International 2003/3004 Asia-Pacific Retail Market Report, total retail sales in the Philippines is expected to increase by 32% in real growth terms from 1,893.7 billion pesos in 2003 to 2,501 billion pesos in 2008, using constant 2003 prices.

These will be exciting times for SM to leverage on its current scale, experience and popularity with the Filipinos with more refreshing initiatives.

SM has already added glitz to its advertising and promotions by cashing in on celebrities, who have come to represent a distinct lifestyle and fashion trend in the Philippines.

With the relaunch of its Makati store last year, SM asked well-known beauty queen and actress Charlene Gonzales to be its celebirty endorser. The choice was appropriate as Gonzales’ appeal cuts through all market segments, with her wholesome image reinforced as wife to one of the country’s top actors, and a mother of twins.

SM will also continue to invest in house brands as it is also catering to the mass market. “Many of our customers like our house brands because they are more affordable,” Sy-Coson maintains.

Department stores and many of SM’s retail stores are scheduled to open when two supermalls, SM City Lazaro and the Mall of Asia, open later this year. Located in a 19.5ha property along Roxas Boulevard, the 454,000sqm Mall of Asia is envisioned to be a destination mall in the Asia-Pacific region.

Hypermarkets will also be set up in SM’s new malls at Molino and Valenzuela.

Although Sy-Coson is not revealing much about the department store in the Mall of Asia — supposedly Asia’s largest shopping mall — she hints that the store is going to reflect many new distinctive features.

“Our department store in the Mall of Asia is likely to be more visually entertaining in design, especially in the areas of in-store promotions and front systems like POS and ERT systems,” she says, adding that SM has embarked on a new programme to help its stores attune to the needs of the market.

“Over the next three years, you will see more changes in the way we present our merchandise and improve our productivity in utilising our retail spaces,” says Sy-Coson.

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