Billionaire Henry Sy, owner of the largest Philippines builder and retailer, is targeting shoppers in their homes as Internet usage surges in the country.
SM Investments Corp., Sy’s holding company, has been testing e-commerce websites and targets a full-scale online operation in two years, Teresita Sy-Coson, a daughter of the billionaire owner and vice chairwoman of the company, said in an interview at her office in Manila. “If we can’t bring them into the store, then go to the house and sell to them,” she said.
Competition for SM Investments, which has the country’s biggest chain of retail stores, has intensified as companies such as Robinsons Retail Holdings Inc. expand their network. An increasing number of people in the Philippines are accessing the Internet, encouraging EBay Inc., Alibaba Group Holding Ltd., China’s largest e-commerce company, and others to back local ventures as they tap online shoppers.
“Philippine e-commerce is still at the ground floor and very fragmented, if the execution is right SM can dominate,” said James Lago, head of research at PCCI Securities Brokers Corp. “Online shopping should be incrementally better for margins because it increases sales without SM hiring more people and spending more on commercial space.”
While retail merchandising accounted for 69 percent of the company’s revenue in the quarter ended September, it contributed 11 percent of its net income, according to data compiled by Bloomberg.
Shares of SM Investments rose 0.7 percent to 704 pesos at the close in Manila. The stock pared its decline this year to 1 percent, compared with the 7.4 percent advance in the benchmark Philippine Stock Exchange Index.
The SM Group currently has websites that sell toys and home appliances as well as vouchers that give customers as much as 50 percent discount in purchasing selected merchandise from SM Store.
“We have very little online and it’s not that significant,” Sy-Coson said Feb. 19. “Give us another year or two. This is the way to go” because of the growing popularity of e-commerce, she said.
More people in the Asian nation are accessing the Internet, including on mobile devices. About 36 percent of the Philippine’s population of more than 100 million were Internet users in 2012, up from 6.2 percent in 2008, according to the World Bank.
The e-commerce market is worth about 50 billion pesos ($1.1 billion), with airline ticket sales accounting for about 80 percent, according to Digital Commerce Association of the Philippines.
“The availability of smartphones and tablets, cheap data plan and payment options have made online commerce more active and attractive for traditional retailers,” said Robertson Chiang, president of the Philippine group of e-commerce merchants.
The market is expected to grow 10 percent annually in the next five years, he said.
SM Investments has more than 230 supermarkets, hypermarkets and department stores nationwide. Its unit SM Prime Holdings Inc., the nation’s largest shopping mall operator, has 48 branches across the Philippines.
Expanding in the online space will complement its existing business, Sy-Coson said.
“We should look at this as an additional channel and not as a replacement of traditional retail,” she said.
SM Investments, with its reach in retail and finance, has the resources to succeed in online shopping, according to Richard Laneda, an analyst at COL Financial Group Inc. The company also owns BDO Unibank Inc., the nation’s largest lender and one of the leading local credit card issuers.
“SM’s serious push is good for the industry because they could attract other players,” said Chiang. “It will also make online commerce more acceptable because they are an established name.”