How small malls compete with big malls
The Philippines’ shopping mall chains have virtually taken over the provinces, branching toward every urbanizing town or city to offer products that provincial customers used to buy only from Metro Manila stores.
Their expansion into the provinces was originally perceived as the death knell for homegrown businesses, particularly in northern and central Luzon. But many of these stores, it turned out, have been surviving due to their more personalized approach, affordable prices, and knowledge of their localities.
Joseph Lao Golangco, marketing officer of Baguio City’s store chain, Tiong San Bazaar, says many retail shops in the provinces have discovered that retaining their original “flavors” made good business sense because “we cannot be poor copies of Metro Manila malls.”
SM City Baguio, which sits on Luneta Hill overlooking downtown Baguio, is the only major retail store to set up shop in the summer capital.
The Tiong San stores that are spread around the central business district spun off from one of the city’s oldest retail stores which the Chinese-Filipino Lao family put up 67 years ago, Golangco says
“Those were simpler times in Baguio,” he says.
Community trust, he says, was preserved because each store had a role. “For example, I remember Tiong San was where one went for gasul (liquefied petroleum gas),” Golangco says.
The convenience of the shopping mall has changed lifestyles, “making every one a mall goer,” he says.
But many Baguio retailers have kept their customers, occasionally because of habit or because of a traditional bond with the old families, Golangco says.
Often, Baguio’s older establishments have homegrown products which the major retail stores won’t sell, he says.
Golangco says he sampled the opinions of Baguio’s stu dents and received criticisms, like Tiong San’s cramped display space when compared to bigger malls.
But these same students shop in Tiong San, he says, because its items were more affordable. Tiong San has opened another store in neighboring La Trinidad, Benguet, affirming the business logic of staying local.
It’s a phenomenon that has helped steer business traffic to other major stores in Baguio.
Abanao Square is celebrating its 10th year in Baguio this year. Its tenants include a mix of branches of a major bookstore, a fast food chain and a hardware, and local shops, like a homegrown leather and shoe store.
Abanao Square’s owners have asked the Baguio City council to allow the mall to host business process outsourcing clients.
The Baguio Center Mall, on the other hand, was developed in the late ’80s by the family that built the defunct Syvel’s chain of stores. Situated in front of the Baguio City public market, it offered Baguio’s first multiplex cinemas.
In Dagupan City, while some residents have been lured by mall chains, many still shop at homegrown stores where they “feel at home and comfortable.”
This is how the Magic Group of Companies, a homegrown chain of supermarkets, has survived.
Pangasinan hosts two major shopping malls—the SM City in Rosales town and Robinsons Place in Calasiao town. SM is also planning to build a mall in Dapupan and negotiations are ongoing, says Mayor Benjamin Lim, whose family owns and operates Magic.
Magic has branches in several towns in Pangasinan, Nueva Ecija and the Ilocos provinces.
Lim says Magic’s sales dropped by 15 to 20 percent, much like many other Dagupan stores, when Robinsons opened its store in March.
“But our experience is that the newly established malls affect local retailers only for a year or two, then sales will return to the original level,” he says.
He cites Magic’s store in Villasis town, where sales dropped when SM City Rosales opened, only to see sales rise again.
“[Major shopping malls from Metro Manila] will go to regional centers like Dagupan, Urdaneta City, San Carlos City and San Fernando City in La Union. So we created a business model that will withstand the stiff competition by going to bigger towns. We will go where they will not go to enable us to survive competition,” Lim says.
Lim says Magic designs its stores to fit the population and economy of their target areas, complete with a staff that is trained to deal with local culture and behavior.
“We conduct periodic seminars to upgrade their service ability. Saying hello and wearing a smile is a standard to us but we always try to give something beyond the expectations of the customers. That could be the reason why we are successful. We also make sure that our personnel are satisfied so they can satisfy the customers. Our concept is a family type of organization that they belong,” he says.
The company has around 5,000 employees, some of whom have worked there for 35 years. Children of retired employees have also started working for the company, he says.
Magic, he says, also maintains a good relationship with sari-sari store owners.
“Sari-sari store owners used to travel to Dagupan to buy their supplies. Now that Magic stores are closer to their communities, they don’t have to spend on transportation and they do not need to buy supplies that they could stack for weeks. They can come every day because we are in the vicinity. Our business direction is to service not only walk-in customers but people in the barrio, through the sari-sari store,” he says.
“Local malls also help local suppliers, with which the big time players would not deal—suppliers for chicken, local meat products, vegetables, aquatic products and eggs. We also have house brands and get locally-produced items like candles and preserved food,” Lim says.
In Tarlac, the entry of SM may have sent jitters to homegrown mall owners but Metrotown Mall in Tarlac City is still doing good business, says Harry Uy, the mall’s marketing manager.
If any at all, Uy says, the competition has made them sharper and more focused, further strengthening what they describe as their advocacy marketing.
By advocacy marketing, Uy says they craft programs that cater to what the market wants.
“We don’t copy; our programs are personalized,” he says.
Uy says customers are coming back now because they can get quality products at more affordable prices from mall-based shops.
During the first months of operation of SM, Uy says their foot traffic was reduced but they understood that there was novelty and people wanted to see what’s in there. Today, he says, stores in their malls are regaining profitability.
“We did our homework,” Uy adds.
More than knowing the Tarlac market because “this is where we grew up and we know the culture,” Uy says they also took time to learn and study the competition.
Uy says they scoured the country looking at the various branches of one mall chain.
“We wanted to see how they are so we can find our niche and sustain operations,” he says.
“Of course, part of strategizing is accepting what we don’t have and what the competition has. This is mall area or space. By sheer size, there is no contest,” he says.
But Uy adds they offer what they describe as “entrepreneur friendly rates” to lessors in their mall.
“We offer flexibility if only to help entrepreneurs grow,” he says. About 40 percent of their tenants or lessors are from outside Tarlac and 60 percent are local entrepreneurs.
“But we have the staples, the usual things people look for in a mall. The usual fast food chain, food court, etc., are there,” he says.
Uy says they also provide their customers free parking and free use of a playroom for children of shoppers.
The Land Transportation Office and the firearms licensing unit of the Philippine National Police had set up satellite offices in Metrotown Mall.
Owned by the Tarlac Metrotown Corp., Metrotown Mall was established in 2001, the third to be set up in Tarlac. In 2004, it was awarded one of the best provincial malls by the Philippine Retailers Association and the Department of Trade and Industry.
In Pampanga, Franda is widely regarded as the first shopping mall in the capital San Fernando.
It was built in 1978 on a land owned by Lorenzo G. Francisco and Lorenza B. David along the MacArthur Highway, just before the Baluyut Bridge, the couple’s granddaughter, lawyer Aisa Velez, says.
Then San Fernando Archbishop Oscar V. Cruz led the blessing of Franda when it opened in October 1979.
On the ground floor were Tropical Hut and Chinabank. On the second floor were Jewel Box, Auring’s Beauty Parlor and stores that sold clothes, shoes, accessories and makeup. On the third floor were a computer school, law offices, dental clinics, school and office supplies, a bookstore, Elynda’s Jewelry, Standard Insurance and People’s Appliances.
The businesses folded up shortly after the June 1991 eruptions of Mt. Pinatubo and the North Luzon Expressway and the Olongapo-Gapan-San Fernando Road (renamed Jose Abad Santos Avenue) replaced the MacArthur Highway as main thoroughfares, says Velez.
Franda survives now on leases of office spaces and the mall-like atmosphere is gone.
In Angeles City, the Nepo Mart opened in October 1968 with more than 200 stallholders. This one-story market is part of an 11-hectare commercial complex owned and ran by Juan and Teresa Nepomuceno through their son Peter, an engineer, says Erlita Mendoza who documented the lives, enterprises and civic works of the couple in the book “A Cofradia of Two.”
The Nepomucenos built the market after establishing an electric power company, ice plant and a soda factory.
The idea of putting up the Nepo Mart came to Peter in 1967 after a fire gutted the public market. He planned a one-stop retail for fresh produce, meat and seafood.
The local government moved the public market from San Nicolas to Pampang, advising the Nepomucenos to host the PX (Post Exchange) trade instead.
With the local government’s permission, the stallholders of Nepo Mart sold imported goods and hard-to-find foreign items, canned goods, coffee, candies, chocolate, shoes, perfume, clothes, imported cigarettes, wines and liquor and toys. Traders took the goods from wives and dependents of American military personnel who used their PX privilege in what was then the Clark Air Base.
By the 80s, Nepo Mart II was built to accommodate more retail outlets.
On its 44th year and minus American service personnel, Nepo Mart has become a center of dry goods, competing with the San Nicolas public market, says Liza Nepomuceno Mapua, who helps manage the commercial complex.
In the same property, the Nepomucenos opened the Nepo Mall in 2003, with Robinsons as an anchor tenant.
A new building, for a BPO firm, has been built near the Angeles Electric Co.
Mapua says the Nepo Mart is “slated for redevelopment.”
She says its good location helped it survive and increased its prospects for coping with the competition.
The NE Supermart Mall, the first integrated shopping mall in Cabantuan City, still services Novo Ecijanos 29 years after it was established.
Its owner, Leticia Uy, is unfazed by competition from other establishments, including another mall that she owns.
“I was not dreaming of anything else then but just to improve on with the bakeshop-grocery store-bookshop that I built. It was my son, Lito, who kept on enticing me to put up a mall,” Uy says in an earlier SundayBiz interview.
Using a P45-million bank loan, Uy built a three-store building that originally housed a grocery store, a bakeshop, a restaurant, several bowling alleys, a cinema house, a bakeshop, a coffee shop and spaces for tenants. As dreamed of by Lito, the mall was fitted with an escalator.
In 1996, Uy, through her NE Group of Companies, put up the NE Pacific Mall along the Maharlika Highway a few kilometers from its downtown area. It was developed by the Landco Pacific Corp.
The NE Pacific Mall has a supermarket, a family amusement center, fast food centers, three state-of-the-art cinemas and over 300 shops and restaurants with 250 clusters shops.
In 2008, the Robinsons chain of malls entered into an agreement with the NE Pacific Mall and built another mall beside it. Interconnected, these two malls appeared not in competition with each other but share patrons. Another mall is operating in another section of the downtown area. Called the “Megacenter the Mall,” it is a five-story building with eight escalators in a 5.5-hectare area. Built in 1998, this mall is owned and operated by the CHAS Realty Corp.
Although doing well in terms of patronage by their respective clients, the performance of the three malls, however, will be tested as soon as the SM City Cabanatuan starts operating two or three years from now.
The SM Prime Holdings, Inc. has applied for a zoning permit for a four-story mall to be established in an area midway of the existing shopping malls here.