SM Ends 2016 with Most Diversified Retail Operations

From its origins as a small shoe store, SM’s retail business has become the most diverse in the country today, following the significant merger of its specialty stores under SM Retail in 2016.

The merger has allowed the retail business to fully align with the direction of SM’s other core businesses in banking and property. All three core businesses are able to pursue and increase the momentum of expansion across the country and provide a business mix that will better serve communities where these businesses operate.

In February 2016, SM’s Board approved the merger of SM Retail with several leading local specialty retail stores which received final approval from the Securities and Exchange Commission in July 2016.

SM Retail now comprises market leading brands across food retailing, department stores and specialty retailing. Specialty retailing now includes a wide assortment of quality products offered through the stores such as Ace Hardware, SM Appliances, Homeworld, Our Home, Toy Kingdom, Watsons, Kultura, Baby Company, Sports Central, Pet Express and others.

In 2016, SM Retail posted total revenues of PHP276.5 billion, growing 8%, while net income grew 7% to PHP10.6 billion from PHP9.9 billion the previous year. The strong results reflected the impact of the merger where the performance of retail affiliates were largely fuelled by discretionary spending on homes, and do-it-yourself activities which track the strong consumption and overall economic growth of the Philippines.

Beyond diversity, the merger also expanded SM Retail’s nationwide footprint to 2,110 outlets at the end of 2016. This comprises 1,556 specialty retail outlets, 57 department stores (THE SM STOREs), 48 SM Supermarkets, 44 SM Hypermarkets and 156 Savemore stores(collectively SM Markets), as well as 39 WalterMart and 210 Alfamart stores.

Provincial Expansion

Amid the increase in nationwide footprint, SM Retail still sees more opportunities for expansion across the country. Store penetration in the Philippines remains one of the lowest in Asia, presenting tremendous opportunities for growth and diversification especially in northern and southern Philippines which have not been reached by organized retail.Through its wide range of retail formats, SM Retail can tailor its expansion program to meet the needs of different communities nationwide. In 2016, about 80% of SM Retail’s store expansion was outside of Metro Manila.

SM MARKETS

SM’s food retail group led by SM Markets added 33 new stores last year, most of which were focused on communities outside of Metro Manila.

With this expansion, SM Markets maintained its lead amid the strong competition in the food retail industry. It continued to focus on improving the assortment of products on its shelves based on consumer preferences while ensuring that services offered by its stores are complete and innovative.

“The strategy was to tap into high traffic in rural and urban areas by opening new stores as well as systematically and periodically renovating existing stores. This way, SM Markets is able to cater to the evolving lifestyles of Filipino consumers who are also expanding and building communities in and outside of Metro Manila,” Mr. Joey Mendoza, President of SM Supermarket said.

SM Markets introduced certain innovations and enhancements which included exploring new formats to provide convenience for shoppers of impulse products and strengthening its Halal and other specialized offerings. It also expanded its ready-to-eat menu to include other snacks and piloted 24-hour operations in Mall of Asia during high seasons.

THE SM STORE

THE SM STORE opened four stores in SM San Jose Del Monte in Bulacan, SM Trece Martires and SM Molino in Cavite and SM East Ortigas in Pasig. Total gross selling areas of all 57 department stores stood at 0.75 million square meters at the end of the year.

As well as benefitting from strong macroeconomic trends, growth for the SM STORE came from its merchandise assortment, promotions and overall in-store improvements to enhance customer shopping experience. This included the use of eco-friendly LED lighting, infusion of ambient scents for a full sensory experience and the expansion of in-store services such as styling, makeover and personal shopper service. Moreover, SM STORE featured new and innovative ways of displaying merchandise that help promote a diversified mix of product ranges.

The SM STORE embarked on innovative partnership programs such as its widely popular and exclusive Viber sticker on mobile phone apps. THE SM STORE’s online shopping site www.smstore.com also uses online retailer Lazada’s digital platform where shoppers can now buy men’s, women’s and children’s fashion and accessories, toys, shoes, bags, as well as beauty, home and office products.

Holistic marketing and promotional tie-ins, such as its Fly & Shop boarding pass privileges with Philippine Airlines, helped address new shopper segments. It also continued to enhance its shop-in-shop concept, providing brands with their own identity in the store while benefiting from its high foot traffic. Moreover, it highlighted exclusive collections such as Top K-Beauty Brands in SM Beauty, creating more selections for shoppers.

“We continue to be optimistic on the retail environment for 2017 and we will build on our areas of strength plus expand on overall customer engagement initiatives,” SM STORE President Chelo Monasterio said.

With a focus on customer engagement, SM Retail will likewise continue to provide the same high quality products and exceptional level of service as it expands its reach into the regions.