Conglomerates taking steps to future-proof their business


(Source: Business World | 11 April 2017)

Conglomerates Ayala Corp. and SM Investments Corp. (SMIC) — owners of an expansive network of shopping malls in the Philippines — are preparing for the future by joining the e-commerce wave, as brick and mortar shops in the United States succumb to online shopping.

The Ayala group acquired a 49% stake in the owner and operator of Zalora Philippines, the country’s largest online fashion platform that offers a wide range of fashion and lifestyle products.

Two weeks ago, SMIC struck a deal to acquire a 30.47% interest in transport solutions provider 2GO Group, Inc.

For the conglomerate, it was an investment in an emerging sector, but analysts believe the deal will strengthen its retail business and its ability to cover the last mile, or the last distribution point of pre-ordered goods to the final destination, in e-commerce.

“They are making a long-term bet because that is the future,” COL Financial Group, Inc. Vice-President and Head of Research April Lynn L. Tan said.

“Clearly at this stage it is not yet profitable, but they are already taking positions.”

The Ayala group is continuously exploring other related investments in the e-commerce space that can complement its existing business.

“We believe e-commerce will continue to grow as technological and logistical infrastructure improves over time,” said Ayala Managing Director Paolo Maximo F. Borromeo.

E-commerce in the Philippines remains in the nascent stage and has yet to reach a critical level where it adversely affects the business of physical shopping mall developments, said Claro dG. Cordero, Jr., head of Jones Lang Lasalle (JLL) Philippines’ research, consulting and valuation advisory services.

“Also, the Philippine mall culture is very different from the US where it is primarily just a shopping location. Filipinos enjoy going to the mall in general,” Ayala’s Mr. Borromeo said.

The Trade department has drawn up an e-commerce road map that envisions e-commerce jacking up its contribution to the economy to 25% from the 10% in 2015 estimated by iMetrics Asia Pacific Corp.

–Krista Montealegre

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