Q&A with Samie Lim on Opportunities and Challenges in Retailing

Samie Lim has a unique gift of visualizing the future economic development of our country, and the talent for harnessing the bayanihan spirit of business leaders by making things happen. He focuses on building unorganized business segments into strong industrial sectors with his mission ‘to serve the greatest numbers of people.’ He has spearheaded the movement to modernize our retail trade in the early ’80’s and in the mid ’90’s. Moreover, he promoted franchising as a tool to create thousands of SME’s and millions of jobs. By the turn of the century, he has successfully developed the template to double our tourism arrivals and tourism receipts. He has led several local and international trade associations and was elected President of PCCI in 2007. He also served as Undersecretary of Department of Trade and Industry (DTI) in 1999. He is Chairman Emeritus of both the Philippine Retailing Association (PRA) and the Philippine Franchising Association (PFA).

Q1: As a top business leader and a former Undersecretary of DTI, what do you think must the Philippines do to be ranked as the preferred investment country in Asia?

A: To be a preferred investment destination, it must be a place where it is easy to start a business, the cost of doing business must be competitive with other countries; our workers’ productivity has to improve. Peace & order and the graft and corruption issues must be dealt with an iron hand. The traffic gridlock and the ‘justice for sale’ must stop. Our tax system must be fair & competitive with our neighboring countries.

Q2: Who are the top 3 retailers you admire most and why? Let’s start with local then international.

A: There is no question, I admire & respect my father, Benito Lim, most. His mission to improve the quality of life of Filipino families and his passion to focus on serving his customers, rather than making money is most admirable. He founded the pioneering appliance and the furniture retail chain, and was the leader in that industry. He led by example, was dependable, worked 7 days a week, was always happy and smiling, was honest, upright and managed to get a good night sleep always. Everyone loved him – the customers, his employees, the suppliers, his landlord, and the trade and civic associations that he actively contributed to.

The second is a protégée of my dad, Wilson Lim. He is the pride of our generation, as he has exceeded all expectations of the family, with his success in appliance, electronic, furniture & supermarket chain. He pioneered the development of community malls outside Manila, and now venturing into the hospitality business.

The SM’s and the Robinson’s are of course the home grown world class retailers everyone knows and respect and they should become leaders in Asia’s retailing scene.

The Walmart, Ikea, Amazon, and the Alibaba are the truly universal behemoth retailers every retailer is impressed at but afraid of.

Q3: Many big retail chains compete on the bases of resources and synergies beyond the usual differentiation. How can pure retail-only businesses compete with these big chains with different industry success factors?

A: The intimate knowledge and the personal care of the small retailers of their customers is the advantage that the neighborhood retailer has over the giant chain. Their ability to customize selection of products suitable for their market, their ability to give special discount, terms and conditions as needed is something that the big corporations have difficulty doing. The ability to manage by exception, and not stick to the corporate operational manual gives them flexibility to adjust quickly.

Specializing, and offering a great selection of a specific category of product or services is an option. One example is a clothing store offering plus sizes, or the other extreme, extra small sizes. There are some beauty salons that do nail services only, or eyelash extension or just shampoo and blow dry. We have seen this in the restaurant business, like the Ramen house, and the barbecue kiosks.

Q4: You have been outspoken against big malls that know the sales of their tenants because of the commission they have been charging, then create affiliate businesses that compete directly with their tenants. Why do you think this is unfair competition? How is this different from big supermarkets creating their own store brands?

A: The malls and the retailers are an integral part of the distribution chain. Any attempt to weaken a part of it will weaken the whole delivery system of goods from the manufacturer to the customer. The local retailers are the core direct customers of the malls. The practice of bringing in strong foreign brand, giving them prime spaces, is counterproductive for the mall. The customers will go to the strong foreign brand, even if they are located in the upper floor of the mall. By locating the strong foreign brand as anchor store, and as ‘magnet’ on the upper floor, the customers will have to pass through the local retail brands on the lower floor, thus giving them a better chance to compete. Their sales will also improve because of the customers’ traffic passing by their stores as they go to the upper floor. The malls will benefit from the increase in retailer’s sales due to their ‘% of sales’ rental charges. The malls can increase the rental rates of the foreign retailers on the upper floors, because the foreign brands are prepared to pay a higher rental since they find our rental very cheap compared to what they are paying abroad.

Many local retailers are ‘quietly unhappy, as they are being ‘ejected’ from their original location, wherein they have painstakingly grown a loyal customer base over the years. Some drastic change is bound to happen, if this practice of replacing the local retailers in favor of the foreign retailers continues. A win-win-win formula can be achieved if the giant mall owners will only talk to their customers, the small retailers.

Q5: In the US, the number of teenagers visiting retail stores has declined from 38 times in 2007 to 29 times a year (source: Piper Jaffray survey). Do you see the same trend happening in Asia? What about the Philippines?

A: As e-commerce progresses, and if the traffic gridlock is not solved, the visit to the retailers and the mall will decline, but not as drastically as in the US. The decline in mall traffic is because the malls in the US are relatively far from the homes of the Americans. The Americans are cash rich but time starved since they don’t have anyone to help them with taking care of their babies/toddlers or do all their household chores. They can return or exchange what they order without any difficulty.

In the Philippines, the mall is literally next door or one short ride away! We are relatively cash starved, but time rich for shopping, especially in an air conditioned store and our return policies are rather restrictive. And being more artistic, tactile, and sensitive, we have to see, touch and even smell the actual product before we buy it. So brick & mortar will still be around for a long, long time.

Q6: What do you think about the newer concept of Click & Collect (wherein customers pre-order and buy online but still go to a store to fit and pick-up). This is a fusion between online delivery & retail store.

A: The Philippine version will probably be 4C’s — CLICK, CHECK it out & COLLECT with a physical place and person to COMPLAIN to. (Not the robotic voice on the other end of the phone).

Q7: Your company Francorp has helped many retail companies expand via franchising. Of the many franchises you are involved in, which are you most excited about and why?

A: The next big thing in franchising are basically in services, specially health & beauty services (beauty salon just for nails, eyelash, make up, shampoo, hairstyling), care for elders (home companion, home nursing care, retirement home, funeral homes, cemetery), pet care (veterinary dog / cat grooming, dog / cat training, dog dental care, dog / cat hotel, dog / cat hospital, dog / cat crematory), education, enrichment for toddlers, child day care center, industry vocational school and basic home services (housekeeping, plumbing, electrician, painting, gardening)

Q8: How do you know if a retailer is ready to have their business franchised for success?

A: You are ready to franchise if your business is profitable, there is a line of customers waiting to be served, and you feel there is a need for your product or service in other areas and you have the passion to extend your product and service to these market, and you can also work with other people.

(Josiah Go is the chairman of marketing training and advocacy firm Mansmith and Fielders Inc. For full transcript as well as interviews with other thought leaders, please follow www.josiahgo.com

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Josiah Go features the movers and shakers of the business world and writes about marketing, strategy, innovation, execution and entrepreneurship


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