In August, Winshang.com, one of the most influential web portal for commercial property industry in China, interviewed Assistant Vice President of SM China Operations Mr. Ronald Allan Brosas. The interview highlighted three major enablers of SM's success over the years. Below is the summary of the interview.
Taking root in developing cities as a catalyst for the city growth
SM Group is consisted of 5 listed companies, its core of businesses cover retail operations, mall operations, banking, property development and tourism and conventions etc. It is one of the largest integrated property developers in the Southeast Asia. However, it is now facing challenges such as excess production, homogenization and high vacancy rate caused by the fierce international competition and the ever dominant e-commerce in China market. “For commercial real estate development, SM would customize the strategies for different projects in different markets. But SM’s fulfillment of the “All for you” concept has never been changed since the day the company was established.” Allan Brosas said, facing up to the challenges.
Winshang.com: As we know, SM Group was founded by the Chinese-Filipino Mr Henry Sy Senior in 1958 and became one of the largest integrated property developers in Southeast Asia. Could you please introduce the differences in SM’s strategic planning in the Philippines and China? What does SM think of the Chinese investment environment?
Mr. Allan: China market differs greatly from the Philippines market. In the Philippines, once getting into the city, SM would soon become the symbol of the city, so there are not so many limitations for our investment and selection of locations. In comparison, the China market is much more sophisticated with greater prospective especially in tier 1 cities. But the land there is often extremely rare and expensive, and the competition is so fierce with all types of shopping centers opening everywhere in the cities. Therefore, what SM does is to select a developing city and work closely with the local government to act as a catalyst for the city development, and grow together with it. This is both a challenge and an opportunity for SM. And a competitive environment could, on the other hand, motivate SM and its industrial peers to keep improving ourselves, thus elevating the entire China shopping center industry to a higher level.
Winshang.com: What’s SM’s strategic layout and positioning in China market?
Mr. Allan: Currently we have 7 malls in operation in China. To adjust to the dynamic China market, SM intends to develop the “city within the city” that meets the requirements of as many customers as possible, that introduces the citizens its mall lifestyle, and that grows together with the city. By positioning ourselves to target at the mid-level market, SM maximizes the consumption capability of the core force – the middle class. Meanwhile, the positioning makes us available to high-end customers and inviting to the mass public, serving almost all groups of customers.
Based on the strategic positioning, SM has developed two kinds of projects, namely the City and the Lifestyle Center. But whether the combination will be duplicated in other cities than Xiamen depends on the local market demand.
Winshang.com: In recent years, the traditional retailers are struggling to survive due to the e-commerce clash, while the number of shopping centers in China is surging, which has led to problems including excess production, homogenization and high vacancy rate. What’s SM’s point of view to this situation? Do you have any solutions related to commercial property development, positioning, leasing and operations?
Mr. Allan: In China, the rising e-commerce has changed customer behavior. It seems that shopping centers have become a large “fitting room” for online shoppers. So what SM is doing now is to increase “things that cannot be bought on the internet”, meaning increasing space for dining, healthcare, entertainment and other experiential businesses. Besides, we will keep improving our services, for instance, adding convenience facilities for women, elderly, disabled people and special people, to improve the customers’ shopping experience.
In addition, to increase the foot traffic, SM has introduced plenty of “WOW” factors. Take Xiamen SM Lifestyle Center for example, we built a sky garden on the roof connected to the restaurants. We are also planning to add a runway to it, providing an area for the joggers. These are the typical measures we take to deal with e-commerce challenges and homogenization.
Winshang.com: Since opened in 2009, Xiamen SM Lifestyle Center has introduced many brands new to Fujian such as MUJI, ZARA and SEFORA. In 2016, the first APPLE STORE of Fujian province was opened in this mall. As a multi-national enterprise with 32 years’ experience in commercial property development, what do you think are the advantages of SM’s commercial property operations in China?
Mr. Allan: “Professional operations, rent rather than sell, central management, value over profit, efficient marketing and promotions, maximizing reach, and people-oriented” is the business model formed over decades of exploration which we consistently stick to. Meanwhile, by targeting us at various customer groups and introducing more first brands of the city and region, SM hopes that customers can really enjoy their shopping here. This is also how we differentiate ourselves from our competitors and how we grow quickly.
Dedicated to public welfare as a socially responsible corporate
To a successful company, interest is not just about what you take from your customers, but also about what you give to the public as a return for your gains, and taking yourself as a part of the community and having a sense of responsibilities for the society. “Besides environmental practices, SM is dedicated to public welfare in various areas. By launching innovative projects, natural resource and environmental protection activities, SM hopes to contribute to the community and city it serves, and bring positive changes and sustainable development to the neighborhood.
Winshang.com: To fulfill your commitment to the public, SM carried out the CSR program SM Cares in 2004. Could you please introduce us about the program?
Mr. Allan: Through SM Cares, the company’s holistic programs are geared towards social responsibility through its different committees: Environment and Sustainability, Disability Affairs, Youth Development, Breastfeeding Mothers and Elderly Care.
Take the Youth Development for example, SM has been holding brand campaigns related to children for many years in China, such as the SM Little Stars and SM Baby Games which have become an important childhood memory for many children. Every July, SM holds the SM Children’s Book Reading Day activity in its 7 malls in China in order to encourage children to explore the interesting world of reading, get to understand different cultures and establish a positive value through reading.
Winshang.com: We’ve heard that you attach great importance to the environment, and you have carried out the solar projects in 3 malls in Xiamen and Jinjiang. Could you please share with us your environmental philosophy and practices in SM’s projects? Will the philosophy become a standard for the development of all SM China projects?
Mr. Allan: SM has always been dedicated to combining environmental protection with our projects. This will become an important standard for us to develop a project. Take the ceilings of all our malls for instance, SM applies a special design and material that allows natural lights to get in and absorbs massive noises to prevent us from noise pollution. Another is the solar power projects you mentioned at 3 malls in Xiamen and Jinjiang, which generate 4% of the total electricity consumption of the malls and turn us into energy-saving shopping centers.
Other environmental practices of SM include the SM Earth Hour campaign held every March, when over 60 SM malls around the world switch off their lights simultaneously, advocating citizens to be environmental ambassadors and put energy saving and emission reduction into practice. In the Philippines, SM planted 15 million trees to purify air and conserve water and soil. Our practices have been recognized by the United Nations and we have been invited to the United Nations conferences to share our experience.
Building benchmark projects with years of practices
In 2001, Henry Sy Sr., bearing the affection to his homeland, set foot in China with his first stop in his hometown – Fujian Province. Since then, SM followed the footprint of China urbanization and invested in Xiamen, Jinjiang, Chengdu, Suzhou, Chongqing, Zibo, Tianjin and Yangzhou for shopping center development. As regarding the secrets of SM’s success, Ronald Allan Brosas concluded them into three major enablers: first, industrial experience gained over the years; second, cultivation of employees’ ownership; third, commitment to the common growth with the tenants.
Winshang.com: SM City Xiamen is the first stop of SM China, and has won numerous honors for SM and become a milestone of the group since then. Can you introduce the reasons for SM to have chosen Xiamen as its first stop in China? What is the role of SM City Xiamen in the promotion of SM brand in China? What are the secrets of the success of this project?
Mr. Allan: The founder of SM Group Mr. Henry Sy Sr. was born in Jinjiang, Fujian Province. He hoped to bring his success back to his hometown and contribute to its economic development. So it is the very basic reason for him to select Xiamen as the first stop, out of the hometown affection. And of course, Xiamen was much easier for Mr. Henry to get in because he knew about it. In addition, he saw the great potential and promising prospect of this city.
The success (of SM City Xiamen) was not achieved overnight. Under the leadership of our President Mr. Hans Sy, this project inherited SM’s philosophical essence accumulated over the years. We focus on fostering ownership spirit of our employees. More importantly, we adhere to our commitment to the common growth with our tenants. In short, it is SM’s fulfillment of the all-win of “employees, tenants and customers” that has enabled our success in Xiamen.
In spite of that, the success of SM Xiamen has provided plenty of precious experience for us in project development and operation in other cities, and played an important role as an endorsement for our cooperative negotiations with the governments and brands.
Winshang.com: SM Xiamen 3rd phase is under construction, can you introduce the progress of the project and its highlight features compared with SMXM and SMLS?
Mr. Allan: Currently we have the first phase SM City Xiamen and the second phase Xiamen SM Lifestyle Center in this city. Soon SM will reveal to Xiamen citizens the advanced projects – the third and fourth phases. The new projects will be a complex of hotels, apartment buildings, office buildings, exhibition center and a shopping center targeted at mid- to high-end market with entry lux brands.
In the future, the four phases will be connected to each other with skywalks, forming a super city complex integrating shopping,dining, entertainment and business. Just like the “city within the city” I mentioned before. Currently the third phase is under construction.
Winshang.com: SM City Tianjin, of which the decision making is the fastest, the scale largest and the investment greatest, is also opening soon. Would you like to give us a brief introduction to it?
Mr. Allan: SM City Tianjin is located in Tianjin Airport Economic Area (TAEA) which was announced as a free trade zone in April last year, indicating a great business opportunity. Its construction area is 560,000 square meters. The company invested 3 billion RMB on this project. It will cover various types of businesses ranging from SM Store, large-scale supermarket, cinema, exploration fairyland, themed stores, restaurants, entertainment, and cultural experiences. Its service radiation will not only cover Tianjin citizens, but reach residents at the Bohai Sea circle with its immense scale and business cohesion.
Winshang.com: What is the group’s overall development plan in China? As the leader of SM China Operations, what are your expectations?
Mr. Allan: People’s income is rising fast in tier 2 and tier 3 cities. SM believes that China – the largest economic entity in the world – will keep bringing about new breakthrough and opportunities. Over the last 15 years, the total construction area of SM China shopping centers has reached 950,000 square meters. By the end of this year, SM China will embrace the opening of the milestone project – SM City Tianjin, which will increase the total construction area of SM China up to 1.5 million square meters, an over 11 times increase compared to year 2011.
The future SM will continuously seek opportunities to open shopping centers in China based on our core value: Focus, Hard Work, Integrity, Innovation, Prudence.
Postscript Note:
Either the strategic positioning of growing together with the city or the caring SM Cares has demonstrated SM’s value throughout the process of its development: All for you. “SM to me is not just a job. I am passionate about it. This is why I have served this company for such a long time. This is the impact SM value has made on me.” Allan Brosas said genuinely. Holding on to this belief, SM will keep pace with the times, and keep innovating and improving itself to meet the changing requirements of the customers.
(SM translated it from the original Chinese article on Winshang.com Fujian Station by Ms. Zheng Lingshan. The publication is with first obtaining permission to do so)