MANILA - One of the secrets to a successful business is foot traffic, SM Supermalls chief operating officer Steven Tan said Wednesday while answering a debate on whether it is best to set up shop inside or outside the mall.
At the Franchise Asia Philippines 2019 International Conference, the Philippine Franchise Association (PFA) engaged mall operators and entrepreneurs in a debate called “To Mall or Not to Mall: Which is Better for my Business.”
Tan helps run SM’s 72 outlets in the Philippines and 8 branches in China. Based on experience, he said, malls offer “high proof of customer traffic” and visibility for businesses.
With the worsening traffic in the metro, malls such as SM “complements” the changing behavior of consumers who now prefer to work, live and play in one location, he said.
“For everyday errands and social activities people prefer a complete one-stop shopping mall where retail, F&B (food and beverage), leisure, services, wellness, you name it, LTO (Land Transportation Office), DFA (Department of Foreign Affairs) are under one roof, in one place, and that is a shopping center,” he said.
Startups and franchise owners can also benefit from the expertise of mall operators such as SM, Tan said.
“With our know-how we recommend the best location to get your brand off the ground. We can map it out for you, how to grow your business,” he said.
Potato Corner is just one of the many businesses that found success in malls. Its first kiosk was built inside SM Megamall in 1992 with a P100,000 capital, which was recovered in just a month, said its president and CEO Jose Magsaysay Jr.
Today, majority of Potato Corner’s 1,300 branches are still inside malls, Magsaysay said, adding that their growth is directly proportional to the growth of SM.
Higher rental fee is a “small price to pay” given the foot traffic, security and convenience that malls offer, he said.
“If your sales is P100,000 a day, it pays for the higher rent, it pays for everything,” Magsaysay said.
“A mall is a marketplace curated to serve a community so the market can get what it needs and locators can get a decent living,” he added.
NOT TO MALL
Refuting claims that malls are the best and only option for businesses, Jones Lang Lasalle Inc’s head of Research and Consultancy Janlo Delos Reyes said customer traffic makes no sense if people are not aware of the brand.
Malls also gather similar businesses together such as electronics or food, giving small brands “tight competition,” he said.
Aside from having to fight it out with big brands, renting space in malls requires “massive capital” due to premium leasing fees, he said.
Delos Reyes recommended setting up a business in alternative areas that have cheaper rental fees but with high sales potential such as condominiums, hotels, airports or other stand-alone sites.
“There’s a lot of stores that are successful even outside shopping malls. It doesn’t necessarily mean that shopping malls will be the best site for you,” he said.
One good example of a business that thrives outside the mall is convenience store chain 7-Eleven. Setting up a stand-alone shop compared to putting up branches in malls is beneficial for 7-Eleven since it gets more flexibility to operate 24/7, said regional operations head for Visayas Francis Medina.
“We serve affluent areas and really mass market areas. That’s how flexible the brand is,” Medina said.
He likened malls to a "jungle" where there is stiff competition. Operators also charge for marketing, promotions, and a percentage of sales, he said.
But competition is good for the business as it forces them to level up, said Potato Corner’s Magsaysay.
“If you're alone and there's no competition beside you, you’ll never become better. If in the mall you’ll be forced to do whatever it takes to develop your brands so you move up," he said.
Despite 7-Eleven’s stand of “growing outside the malls,” its relationship with shopping centers is evolving, Medina said. It currently has about 30 stores inside SM malls, he said.
SM's Tan said malls offer convenience and instant gratification for consumers, as well as foot traffic and expertise for businesses.
At the end of the day, it is up for business owners to strategize. What is important is for entrepreneurs to learn to choose a location where their target market is, and a space which allows for growth and expansion in the future, Delos Reyes said.