SM Group's Bold Expansion and the Philippine Market Boom
SPRAWL
In an ambitious expansion plan for 2024, the Philippines' leading retail conglomerate, the SM Group, is set to enhance its presence across the nation by launching five new shopping malls. Notably, this expansion includes ventures into the Ilocos region, which holds personal significance as the birthplace of President Ferdinand Marcos Jr.
Steven Tan, the visionary president of SM Supermalls, has mapped out the strategic locations for these new establishments: SM City Laoag in Ilocos Norte and SM City in La Union, along with a premier mall in proximity to Nuvali in Sta. Rosa, Laguna, SM City in Mandaue City, Cebu, and an expanded presence in SM City Zamboanga.
This move is part of SM's broader strategy to capture diverse market segments across the Philippines, reflecting the company's bullish stance on the Zamboanga market, inspired by the overwhelming success of their initial mall opened in December 2020. The groundbreaking ceremony for the second mall in Zamboanga, held in February 2023, marks a significant step in realizing this vision. The introduction of SM malls in Laoag City and La Union for the first time is a response to long-standing community requests, symbolized by a 2016 petition advocating for an SM mall in La Union.
Tan envisions these new malls as embodiments of local culture and aesthetics, with designs that resonate with the surrounding community. The La Union mall, for instance, is set to feature design elements such as timber and beige tones, reflecting its renown as a premier surfing destination. In contrast, the mall near Nuvali will boast a unique architectural feature: a sprawling one-hectare, air-conditioned garden at its core, offering a tranquil oasis for shoppers amidst the retail environment. Further expanding its portfolio, SM acquired J Center Mall in Mandaue City in 2023, with plans for extensive renovations and the addition of J Tower Residences, enhancing the mall's appeal and functionality.
The resurgence of the Philippine retail sector post-pandemic has been nothing short of remarkable, with SM Supermalls at the forefront of this revival. Tan's reflection on the surge in mall visitors and sales post-pandemic underscores the sector's robust recovery and the public's renewed enthusiasm for mall-going experiences. SM Prime Holdings' financial performance in 2023, with a net income surge to P40 billion—a 33% increase from the previous year—illustrates the sector's vitality. This financial success is attributed to the mall business, which constituted 56% of the company's consolidated revenues, underscoring the pivotal role of physical retail spaces in the company's growth strategy.
With a portfolio of 85 malls across the Philippines as of October 2023, SM's strategy emphasizes regional expansion beyond Metro Manila, tapping into the faster growth rates of Luzon and the Visayas. This approach aligns with broader market trends, as identified in the Kearney Global Retail Development Index (GRDI) 2023 report, which highlights the Philippines as a dynamic retail market in the Asia Pacific. The report attributes this dynamism to a combination of factors, including a burgeoning middle class, rapid urbanization, and a vibrant consumer culture, positioning the Philippines for sustained retail growth.
The GRDI 2023 report further elaborates on the diverse strategies employed by both government and private sectors to bolster the retail ecosystem, particularly for small retailers. From leveraging social media platforms like TikTok for rural outreach to implementing innovative retail solutions and embracing ecommerce, the Philippine retail sector is undergoing a transformative phase. The embrace of digital platforms and Buy Now Pay Later (BNPL) schemes signifies a shift towards a more inclusive and accessible retail environment.
Moreover, the report shines a light on the expansion efforts of local and international retailers, indicative of the sector's buoyant outlook. The entry and expansion of global brands, alongside the growth of local retail giants, underscore the Philippines' rising stature as a compelling retail destination. This expansion is not just about growing footprints but also about enriching the consumer experience through innovation, blending physical and online retail in a seamless shopping journey. The Philippine retail sector's adaptability and forward-thinking strategies are paving the way for a vibrant, inclusive, and dynamic retail landscape in the Asia Pacific.
