Swedish fast-fashion giant H&M has opened its first store in Manila as the city sees a boom in retail development.
Chief executive officer Karl-Johan Persson couldn’t remember if the sprawling 32,290-square-foot space, spread over three levels in the Mega Fashion Hall wing of the SM Megamall complex, was H&M’s 3,400th, but said that “this is the 55th country we’re in.”
H&M’s arrival marks a turning point in retail in the Philippines in more ways than one.
H&M is the last of the major fast-fashion chains to establish a presence in the country, currently touted as Asia’s best performing economy, with growth forecasted at 6.2 percent for 2014. Zara, Topshop, Uniqlo, Forever 21 and Mango have been entrenched in the retail consciousness for several years. Unlike these brands, H&M decided to enter the Philippines on its own, without a local franchisee, distributor or joint venture partner. The last major fashion company to do so was Louis Vuitton in the mid-Nineties.
“We’ve been looking at the Philippines for a number of years,” said Persson. “We’ve known for a long time that it’s a super-interesting market. Of course it takes a little bit more time, and more investment to go in on our own, but we prefer to do it this way, we think it’s better in the long term, to have more control.
“It was also a matter of finding the right space at the right time.”
Persson found several spaces. “We’ll be opening four more stores in Manila before the end of the year,” he revealed. The H&M banners have been up for months at SM Makati, at the heart of the central business district of Makati City, as well as at SM North Edsa, Robinson’s Magnolia and Robinson’s Place Manila, all high customer traffic areas.
Finding the right space is always a priority when entering a new market, but the flurry of construction in Manila over the past few years has resulted in new premium retail developments being unveiled, most notably SM Aura Premier and Bonifacio High Street in Bonifacio Global City, a former military base converted into a sprawling upmarket mixed-use community. Older developments such as Greenbelt, Shangri-La Plaza and SM Megamall have been upgraded and expanded, making the city more attractive to international labels looking to enter a fashion-hungry market.
SM Prime Holdings, the conglomerate behind SM Aura, Mall of Asia and Megamall, has itself been undergoing a transformation. Once known as a developer of monolithic and somewhat mediocre malls, as well as a purveyor of mass-market local and own-label fashion, SM has upped its game. Not only has it shifted to building luxury retail developments, as SM Aura and the new SM Mega Fashion Hall demonstrate, it has also introduced several international brands to the country.
Millie Dizon, spokeswoman for the SM group, explained that “as a retailer, change is in our DNA, and it is important for us to serve the ever-changing needs of our customers. With the onset of globalization and technology, customer tastes have changed, and we want to be able to be in tune with them.”
SM Retail has partnered with global brands like Forever 21, Uniqlo, Suiteblanco and Sfera, both Spanish brands, and even Crate and Barrel.
SM Mega Fashion Hall, spread over five floors with 125 tenants, has a total retail floor space of over 925,000 square feet. Zara has its flagship store there, right across H&M.
Taking the opposite tack is Stores Specialists Inc., whose portfolio of brands includes accessible labels such as Zara, Aeropostale, Banana Republic and Gap as well as department store outposts like Debenhams and Marks & Spencer (M&S), and high-end luxury names like Cartier, Ferragamo, Prada, Alexander McQueen, Tory Burch, Michael Kors and Marc Jacobs.
SSI recently inaugurated a new shopping center within the BHS complex, called Central Square. Executive vice-president Anthony Huang said SSI leased the land for long-term use from the landlord, Ayala Land Inc., which, through its retail subsidiary Ayala Malls, has a track record of building high-quality retail developments, such as Greenbelt and Glorietta. SSI then built a shopping center that fuses the strip mall concept with outdoor green spaces.
“It’s actually a joint development with Ayala,” Huang elaborated. “We built the two basements and three retail floors, and they built the cinemas. For us, Central Square is a retail destination that will have a lot of firsts in the country; for example, Pottery Barn, which opened recently. The first M&S Café is there, and it’s doing extremely well; the first Reiss store will be there. And we have other brands that will be opening there in the next few months.”
The blend of indoors and outdoors, with a nod to environmental consciousness, has become an Ayala Malls trademark.
“Our mission,” said Joseph Reyes of Ayala Malls, “is to ensure that we continuously offer a new retail format to the market. When we opened Greenbelt in the mid-Nineties, there were skeptics who didn’t think an outdoor mall would work in the Philippine climate. But we knew that Filipinos don’t want to be cooped up in an artificial environment and wanted to be closer to nature. Thus more than three hectares [7.2 acres] of prime real estate in Makati were dedicated to a park where people could enjoy al fresco dining and commune with nature.”
Bonifacio High Street in BGC, which happens to be a stone’s throw away from SM Aura, is, according to Reyes, “the first main street retail concept in the Philippines, a 400-meter-long boulevard and a 40-meter-wide park with popular brands on both sides and various interactive public art works along the central park.”
Apart from the SSI-represented brands in Central Square, BHS is home to the first Philippine stores of such labels as Y-3, Karen Millen, BCBG Max Azria, G-Star, Superdry, French Sole, Gant, American Eagle Outfitters and Cotton On.
The proximity of malls to each other is not an issue, retailers insist. Mark Gonzalez, the entrepreneur who exclusively represents such labels as Celine, Balenciaga, Peter Pilotto, Comme des Garçons, Dries Van Noten, Lanvin, Carven and Pierre Hardy through standalone stores and his multibrand boutiques Homme & Femme and Univers, has a presence in all the major premium malls. He noted that there was a divide between north and south in terms of suburbs and traffic to a certain location is determined by the actual traffic on the roads, a perennial problem in Manila.
“It’s a question of access. It’s important for my customers to be able to get in and out of a store and keep the shopping experience a pleasurable one,” he said. “But the idea of going into the center of Makati, for instance, is not always appealing because of the traffic. They’d rather go to Univers in Rockwell, not even two miles away maybe, where they are in a commercial environment but outside of a mall. Otherwise we offer a concierge service to our top customers.”
Ben Chan, the man behind Bench, one of the Philippines’ top local fashion labels, also heads Suyen Corp., which represents several international brands such as Casadei, La Senza, Aldo, American Eagle Outfitters, Cotton On and Karen Millen. Like Gonzalez, his stores are present in the major malls.
“Each mall offers different retail concepts, providing different spaces of excitement to the growing retail landscape. This is always good for the market and for brands,” he said.
The increase in premium retail space has undoubtedly benefitted the Manila retail scene. “It creates a good sign for foreign players to tap into the local market,” noted Chan, “especially premium brands with specific lifestyle targets. More retail players in the field make for a more interesting mix of choices for shoppers.”
He candidly admitted, “I have always been afraid of the influx of international brands on the local market as I operate my own retail chain. The impact is very direct on me because retail in my market segment has become a price war of sorts and the price gap between local and foreign goods has become narrow.
“The challenge today is to produce competitive products of better quality yet maintain low price points so you can keep your market edge,” he added.