How SM Retail has reacted to COVID-19

Date : 07 August 2020

Nick Miles

Head of Insight - Asia Pacific

SM Retail in the Philippines has reported retail revenues for H1 down 18% to PHP139.2bn (US$2.84bn), with strong performance in food, offset by heavily impacted non-food revenues due to COVID-19.

Food retail revenue up 15% to PHP100.1bn (US$2.04bn)

Strong revenue growth in food was offset by tough trading conditions across its SM Store and Specialty retail functions, where revenue dropped 57% and 44%, respectively. In partcicular the lockdown in the country had a significant impact on the Q2 results, however the retailer is now adopting all formats to new customer needs. Food sales will have been boosted by the need for essential items, as well as the ongoing expansion of its Alfamart network. Alfamart in the Philippines announced the opening of its 888th store this week. The retailer is focusing on three key initiatives in the current climate; call to deliver (CTD), revitalising online markets selling and preparing for the 'new normal'.

New path to purchase streams being maximised

CTD is a growth initiative that is helping SM Retail in the current climate and already accounts for 10% of volume. Designed to try and make it easier for customers to access products and services during the pandemic, SM is using online ordering, social media messaging and conventional phone ordering for shoppers to place orders. It is offering greater access to store and curbside pick up, plus home delivery via partnerships with third party logistics companies. It is also focusing its marketing on essential items and using live video streaming on facebook to sell fashion. The initiatives stretch across both its food and non-food businesses. The retailer plans to improve the service further by; introduing personal shoppers, improve technology to track deliveries, introduce more targeted promotions and grow CTD sales to 20% by the end of 2021.

Online sales have grown 10x in H1

SM Retail has been slow to accelerate its online presense in recent years, however the pandemic has seen it expand its ecommerce websites from 3 to 10 rapidly in 2020. It has also rapidly expanded its presence on both the Lazada and Shopee marketplaces, increasing from four to 10 stores on each platform. It has also increased the number of stores around Manila offering groceries online. All this activity has seen online sales jump 10x versus pre-pandemic levels.

Ambitious ecommerce plans ahead...

SM Retail has laid out some ambitious plans to accelerate ecommerce, with another 10x increase in sales targeted by July 2021. An exciting development from a grocery perspective, is that it plans to expand grocery ecommerce from Metro Manila, to eventually become a nationwide service, with pick up as a major driver. To realise this growth it will look to; form stronger collaborations with brands, invest in faster and better platforms, improve fulfillment times and capabilities, partner with third party logistics providers, increase the assortment available online, and offer more pick up solutions. 

Tackling the 'new normal'

Creating a safe environment for customers and staff is a top priority for SM Retail. PPE, sanitation and improved communication are three major areas the retailer has introduced into its stores. Shoppers in-store are being asked to wear face masks and enter via disinfectant mats. Thermal scanning and UV light sanitation are also being used, particularly in fashion retail. While social distancing is continually enforced via signage and in-store announcements.