News Analysis Trade

A Philippine branding of China

SM Prime Holdings

It’s a successful Filipino immigrant to China, it has homes in six Chinese cities and is setting up homes in three more – some of those residences are over a thousand miles apart – and its total living quarters cover the equivalent of 220 football pitches. What is it? It is one of the most successful export products the Philippines has ever produced – maybe the most successful.

When most people think about exports, they visualise large container ships and bulk carriers hulking cargoes across lonely seas. Products that normally spring to mind are grains, coal, ore; fish, coffee, bananas. What most people don’t normally think about is shopping malls. But that’s what SM Supermalls, the Philippines biggest-by-far mall maker and operator, has been steadily shipping to the Mainland since 2001.

And this quintessentially Filipino product’s presence in Xiamen, Jinjiang, Chengdu, Suzhou, Chongqing, and Zibo on 853,552 square metres of mall land, accommodating 1,478 retailing tenants and serving a combined population of around 40 million consumers – that’s 39% of the entire population of the Philippines – is just the start.

Add to these an upcoming SM Supermall presence in Tianjin, Yangzhou and Changzhou, and you can build in another 21 million consumers. Now we have more than 60% of the Philippine population being served by nine large Filipino-brand malls. And with a business plan to launch one new China mall a year, the SM logo – the Philippine’s most recognisable brand – is becoming as ubiquitous in the Mainland’s second- and third-tier cities as it is in its home domicile.

That’s some footprint by any standard; but this is not just about nipping out to the shops any more. SM Supermalls are not simply about retailing; they’re a lifestyle product in their own right. The gargantuan SM City Tianjin, for example – 1,000 stores on 109 acres of floor space with parking for 8,000 cars – is now the world’s third largest mall. With enough floorage to accommodate the Great Pyramid of Giza 8.5 times, it houses an Olympic-size ice-skating rink, a 900-seat concert hall, a science-discovery centre with a 330-seat digital planetarium, and an IMAX cinema with an eight-storey-high screen, the largest in the world.

SM Supermalls is the flagship of SM Prime Holdings, which back in the Philippines owns and operates shopping malls right across the archipelago – 58 of them to date with 12 more in the pipeline. Presently, its domestic operation straddles 8.5 million square metres of gross floor area – 14 hundred football pitches if you prefer – and houses the businesses of 17,333 tenants. The world’s third, fourth, fifth, sixth and twelfth largest malls are all SM owned.

These are places of entertainment where families come to eat. These aren’t in-and-out places; visitors spend hours there. In the Philippines all SM malls have mass centres; on Sundays masses are also celebrated in the open areas of these cathedrals to retailing. The food courts are packed. Carnivals and festivals are held in and around them. Families celebrate birthdays and anniversaries there. The malls are an intrinsic part of present-day Filipino culture – they even have a word for going there and hanging out: “malling”.

While SM Prime pretty much has a lock on the mall business in the Philippines – its nearest competitors are Robinson Malls, owned by Robinson Land with some 45 malls, and Ayala Malls, owned by Ayala Land with 24 malls by the end of the year – it is in a far tougher environment on the Mainland. In China, the mall density rises daily. According to professional-services firm, Deloitte, there are currently 4,000 of them; by 2025 that figure could reach 10,000. It’s been said that there is more mall-metres construction in a single Chinese city than there is in the whole of Western Europe.

Tough as all that sounds, SM will continue to export its unique Filipino brand to the Mainland, spending around US$420 million annually on land buying and mall development. SM Prime President, Hans T. Sy, is bullish about the outlook for his China mall business which this year is expected to enjoy double-digit growth. In 2013, the company set in place a five-year budget of US$8.4 billion, an investment which should double the company’s earnings by 2018 – and for shareholders of SM Prime Holdings there’s only one was to describe a result like that; it’s SMarvellous.

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