Philippines retail billionaire shifts focus to e-commerce as Alibaba roars into SE Asia

Overseeing an empire spanning airlines, malls and property, John Gokongwei is preparing to drive into online shopping as well.

MANILA (BLOOMBERG) - Mr John Gokongwei oversees an empire spanning airlines, malls and property. Now the billionaire's family is preparing to drive into online shopping as well.

Robinsons Retail Holdings, one of three giants that dominate retail in the Philippines, has begun moving more of its US$2.7 billion (S$3.7 billion) empire online. The company plans to triple the number of supermarkets that ship Web orders by 2018, said Ms Robina Gokongwei-Pe, the tycoon's daughter and company president.

Other parts of the conglomerate, including department stores, will eventually follow.

Robinsons joins SM Investments and Ayala in exploring e-commerce for a country where life revolves around the old-fashioned mall. All three launched online shops or invested in services over the past year, responding to a generation of smartphone-toting consumers exploring alternatives like Alibaba Group Holding's Lazada.

Soul-crushing traffic congestion - rated among the worst in the world - only accelerates that online migration.

The Gokongweis are quickening their efforts as Alibaba and prepare to battle it out for South-east Asia, a region of more than 600 million that is fast embracing online shopping.

The family already has a small stake in Sea Ltd, the South-east Asian giant preparing a US stock market debut. It has begun selling appliances and selected fashion online, through partners such as Zalora.

But with supermarkets - the primary revenue-driver - Robinsons is making its biggest foray into e-commerce. Online sales through a shopping site launched in May have so far shown promise, Ms Gokongwei-Pe said.

"We're seeing exponential growth in online retail," she said. "This is the way to go given the horrible traffic in urban areas like Manila and a growing market of millennials."

Robinsons will continue to build its brick-and-mortar network, particularly in under-penetrated areas. The company has yet to open a store in about 40 per cent of provinces and cities, said Ms Gina Roa-Dipaling, head of corporate planning.

It is adding 140 to 150 stores this year and will probably open another 140 in 2018 to sustain double-digit growth in earnings, Ms Gokongwei-Pe said. It will also seek supermarkets and drugstores to acquire, she said.

But the shift online, while gradual, marks a turning point for a conglomerate that took patriarch Gokongwei's second name when it opened its first department store in 1980. Robinsons eventually moved into Home Depot-like home improvement, pharmacies, then three years ago started building shopping centres near residential areas to reach a wider market.

Malls remain a fixture of the Filipino landscape, serving as gathering places, dining venues and even places of worship.

But the spread of broadband, plus a growing familiarity with e-commerce, drove double-digit growth in online retailing in 2016, according to Euromonitor International. Smartphone penetration is seen reaching 180 per cent this year - meaning most people have two phones - while internet subscribers are projected to approach 32 million in 2018, it said.

A generational divide is also becoming clearer. Millennials aged 16 to 35 account for 85 per cent of Robinsons supermarket's online sales, while 65 per cent of its brick-and-mortar store revenue comes from 31 to 50 year-olds, Ms Gokongwei-Pe said.

Tellingly, the average online shopper buys five times more than a traditional one, she said.

Still, the country is a latecomer to the Asian online shopping scene, lagging much of the region from Malaysia to Singapore - Lazada's home base and now also Amazon's first South-east Asian market.

Only half a per cent of Philippine retail sales took place online in 2015, but that could rise to US$9.7 billion or 4.7 per cent of the total by 2025, according to a report by Google and Temasek.

On Monday (Sept 25), Lazada said it will begin selling select merchandise from Alibaba's massive Taobao operation to Philippine consumers in coming weeks.

"Online retail isn't going to explode anytime soon but it's good that Robinsons is making a push now while no one among the traditional retailers is leading in this space," said Ms Grace Aller, an analyst with AP Securities.

Seventeen of Robinsons' 145 supermarkets now ship online purchases through delivery service Honestbee. That will rise to 26 by year's end and 50 by the end of 2018, Ms Gokongwei-Pe said.

"We are tapping into a new market," she said.

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