Lazada hosts SM sale as malls, online stores co-exist in Philippines

Joel Guinto, ABS-CBN News

Posted at Oct 17 2017 09:37 AM | Updated as of Oct 17 2017 01:36 PM

MANILA - The country's largest mall operator, SM, kicked off a 3-day sale on Lazada on Tuesday, illustrating what the CEO of the online marketplace says can happen when physical and online retail don't see each other as rivals.

Shopping malls have become the new city centers in the Philippines. SM has 63 outlets locally, ahead of rivals Robinsons Malls with 45 and Ayala Malls with 17.

Five-year-old Lazada, majority owned by Chinese e-commerce giant Alibaba, estimates there are 10 million online shoppers in the Philippines and the number is expected to grow as more people get over their fear of digital payments.

"We do not compete with shopping malls," Lazada CEO Inanc Balci told ABS-CBN News at the company's Fort Bonifacio headquarters.

Having an extended online presence generates additional sales for offline retailers, he said.

"Shopping is an entertainment, cultural activity. It's actually very nice to go to these air-conditioned places. I don't think shopping malls will be impacted by e-commerce," he said.

Lazada CEO Inanc Balci poses at the company's Fort Bonifacio headquarters after an interview with ABS-CBN News

SM's online sale started just one day apart from the end of a 3-day sale in SM Megamall, one of its largest shopping centers located at the heart of the capital.

A deeply-rooted mall culture and slow internet connections is preventing online shopping from taking off in the Philippines, according to officials of the Philippine Retailers Association.

Balci also cites the 5-6 percent credit card penetration rate as another obstacle.

Nearly 9 in 10 Filipinos have no bank accounts, according to a survey by the Bangko Sentral ng Pilipinas, restricting their access to formal credit lines that are necessary for digital transactions.

In the US, Toys 'R' Us filed for bankruptcy as brick-and-mortar retailers feel the pressure from their online rivals. Amazon, on the other, hand is leveraging its e-commerce dominance into a physical bookstore.

Filipino retailers are also betting on e-commerce. In February, the Ayala Group said it would buy 43.3 percent of online fashion retailer Zalora.

SM Investments, on the other hand, bought 34.5 percent of logistics firm 2GO, a firm which analysts said could lay the groundwork for an e-commerce foray.

Balci told ABS-CBN News Lazada was working to win consumers' trust with quality controls and refund policy.

The company is betting on e-commerce growth with plans to double the capacity of its 30,000-square meter warehouse in Laguna province, south of Manila, he said.

"There might be small changes in the retail industry for those who do not embrace the change," he said.

"We see great traction in the Philippines. We are extremely with the way the online retail is going," he said.