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How a billionaire family is bolstering Philippine e-commerce

March 14, 2016 05:45 PM
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(Bloomberg)—Billionaire Henry Sy, owner of the largest Philippine builder and retailer, has partnered with an online retailer backed by Germany’s Rocket Internet SE to target the rising number of consumers in the Southeast Asian nation who shop using the Internet.

SM Investments Corp., Sy’s holding company, has reached an agreement to use the platform of the Philippine unit of Rocket Internet’s Lazada to sell online merchandise from toys to clothes, Teresita Sy-Coson, a daughter of the billionaire owner and vice chairwoman of the company, said in an interview. SM will initially sell light-to-carry nonfood items through Lazada, No. 159 in the Internet Retailer 2016 Asia 500, which eventually could include home furnishings and appliances, she said.

"This strategic alliance with Lazada will further enhance our online store," Sy-Coson said. "It’s a very good match: Lazada has its expertise and we also have our own expertise."

SM Investments, operator of the country’s biggest chain of retail stores and owner of the nation’s largest shopping mall builder, faces intensifying competition as rivals from Robinsons Retail Holdings Inc. to Puregold Price Club Inc. expand their network. Internet access and the use of smartphones have also been rising, encouraging eBay Inc., Alibaba Group Holdings Inc. and Amazon.com Inc., No. 1 in the Internet Retailer 2015 Top 500, to tap local online shoppers.

More Filipinos are accessing the Internet, including on mobile devices. About 40% of the Philippine’s population of more than 100 million were Internet users in 2012, up from 5.2% in 2004, according to the World Bank. The Philippines had about 118 million mobile phone subscribers at the end of 2015.

SM Investments’ alliance with Lazada comes two years after Sy-Coson said in a Bloomberg interview in February 2014 that the group has been testing e-commerce websites and targets a full-scale online operation by 2016. The SM Group currently has websites that sell toys and home appliances as well as vouchers that give customers as much as 50% discount in purchasing selected merchandise from its department stores and supermarkets.

The Philippine e-commerce market is forecast to grow at a compounded annual growth rate of 101.4% from 2013 through to 2018, according to a 2014 report by Ken Research Ltd. The online retail market, a component of e-commerce, is projected to rise 189.2% over the same period, it said.

Internet retailing

Lazada, which began its Philippine operations in 2012, led Internet retailing in the country in 2015 with a 20% market share as it met rising Filipino interests for gadgets and electronic appliances from smartphones, tablets to home theater systems at prices that were a “huge" discount, according to a Euromonitor International January 2016 report.

Lazada.com.ph, which has 7,000 merchants, is the country’s sixth most popular website and ranks 14th globally among online merchant websites, according to Inanc Balci, chief executive at Lazada’s Philippine operations. He said the Filipino shopping pattern has evolved with 60% of their customers buying goods through mobile Internet.

Lazada Group is a privately owned e-commerce company founded in 2011 by Rocket Internet with the goal of building Southeast Asia’s Amazon.com. Aside from the Philippines, it operates sites in Indonesia, Malaysia, Singapore, Thailand and Vietnam. Singapore’s Temasek Holdings Pte is among its large shareholders, according to Rocket Internet’s website.

SM Investments’ retail operations, which include department stores, grocers, supermarkets and convenience stores, posted a 17% growth in profit to 6.8 billion pesos last year on a 7% increase in sales. SM Prime Holdings Inc., its shopping mall venture, had a 14% increase in recurring profit to 20.9 billion pesos.

"The retail business is evolving," Sy-Coson said. “It is important for a retailer to go online and it’s the right move to go with Lazada."

 

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