wrote about SM and Henry Sy in my books (Principles and Practices in
Marketing in the Philippine Setting, and Entrepreneurship: Starting an
Enterprise, Having an Innovation Mindset) because discussion of marketing
and entrepreneurship in the Philippines setting without SM and Henry Sy would
not be complete. The legendary king of retail, king of banking, king of stock
market valuation (His SM Investment and SM Prime are both over a
trillion pesos in the stock exchange of the Philippines), Henry Sy, who passed
away last January 19, 2019, was a strategist worth emulating.
Circumstances of the Strategist:
all know that Henry Sy opened SM North Edsa in 1985, after the Edsa Revolution,
when interest rates were as high as 45% per annum. This was after the
assassination of Ninoy Aquino in 1983. He then followed through with more
malls, creating a malling lifestyle we are now a part of. I often wondered
about the strategist behind the strategy, specifically the circumstances before
a major decision was made.
drove him to start a new mall category while he was operating department
did he mitigate the risk of a new category at the time when interest rate was
high and political stability was low?
made him take that SM North Edsa bold move all of a sudden?
drove this rags-to-riches man to surpass everyone and be the richest man of the
Philippines with his last net worth at US$19 billion (as of Jan. 20, 2019
estimated by Forbes), outranking even the old rich of the Philippines?
have always been curious of the insights provided in movie plots where a person
with PH.D. (poor, hungry and driven) was denied what he/she wanted (maybe a
location or a loan?), and that person will do everything not just to succeed
but to surpass the one who denied him/her. Perhaps, a movie should be done
about Henry Sy for business students to study.
Ways Henry Sy Grew His Business Empire:
appears to be five ways to grow and expand, as can be seen in the strategies of
the late Henry Sy Sr.
Product (from Core to Adjacencies) – He started a small shoe
store in 1946 at age 21, then carried more types of shoes in Carriedo in
Quiapo. From shoes, he expanded to thousands of other non-shoe items
serving his core ‘masa’ customers, leading to the creation of the bigger
SM Department Store in 1972. From department store (now rebranded as The
SM Store), he went into supermarket applying the same retail principles
managing hundreds of thousands of items to different retail and product
categories, tapping simply from his core to their adjacencies.
Geography (from Manila to Provincial to International) – SM
Department Store expanded aggressively in the 1980’s (Cubao, Harrison
Plaza) eventually opening in all key provincial cities. He also expanded
geographically by opening several malls in China.
Business model (From Focus to Conglomerate) – Diversification and
synergy became the business model of the SM Group. His retail group not
only operated SM’s own stores but expanded acquiring either distribution
rights or joint ventures with major foreign brands like Uniqlo, Forever
21, Ace Hardware, Watsons and many more. Building malls led to their
adjacency of property development (SMDC), complemented by a separate
banking unit (BDO) where both shoppers and tenants can benefit,
hospitality (hotels, SMX), education (Asia Pacific College, National U),
and hundreds of affiliates and subsidiaries within the SM Group, many of
their parent companies are publicly listed companies.
Market (From Masa to Rich to Corporate) – While more malls
were built, premier malls were established to cater to the richer clients.
We now see the likes of Aura and other malls. Markets outside of SM Malls
were tapped for foreign brands (located in other malls), as well as their
Save More supermarkets (in residential
communities). Subsequently, corporate markets were tapped by
their sister companies like BDO.
Channel (From Retail to Omni Channel) – Malls much bigger than
department stores were opened as a new channel including four of the
biggest in the world – – SM North Edsa (in 1985), Megamall (in 1991), MOA
(2006), and SM Seaside Cebu (2015), a major tourism come on. Many of their
retail stores now have online ordering and delivery or pick up
counterparts. Mini marts like Alfa mart is a joint ventures with
Indonesia’s Alfa Mart, differentiating themselves like a convenience
stores but at supermarket prices for some (SM Bonus items) while lower
than convenience store prices for most.
Cluster of Competitive Advantages:
growth strategy of Henry Sy also created a cluster of competitive advantages
that made SM hard to beat in their game, evident in their group rewards
program. They operated with lowest cost funds from having several publicly
listed companies, their distribution reach gained them clout and extra margins,
their profitability enabled them to donate billions to schools and in every
major disasters in the Philippines, their business model redefining a set of
core businesses with each core from their hundreds of companies capable of
tapping into new adjacencies to expand, transforming the continuous and
cumulative investment of core to adjacencies, to making SM Group as a
would think Henry Sy simply had a lot of common sense but analyzing his
companies as well as the timing of his decision will lead to the conclusion
that he not only allocated appropriate resources, and hired the right people
who had the discipline of execution to help him create the future, he also
innovated through and through, like launching SM North Edsa as the first mall,
or BDO as the first bank that operated on weekends, changing industry
boundaries with market-driving innovations. The Chinese character for
danger has two words, pronounced as Wei (opportunity) Chi (crisis),
and Henry Sy clearly saw more opportunities in crisis, a man of uncommon
Record-breaking, bestselling author Josiah Go is the Chairman of Mansmith and Fielders, Inc. (the leading marketing and sales training company in the Philippines), and Chairman of Waters Philippines (the market leader in the direct selling of premium home water purifiers in the Philippines). He is Chairman / Vice Chairman / Director of over a dozen companies.