Philippine Retailing Newsletters 2018 PRA Newsletter 2018 Q2 | Page 5

2ND QUARTER 2018 Local News IKEA to open first Philippine store at SM Mall of Asia Global furniture retailer IKEA will reportedly open its first store in the Philippines in 2020 that will be located at one of the country’s biggest shopping malls—SM Mall of Asia, which is operated by SM Prime Holdings Inc. IKEA Southeast Asia Managing Director Christian Rojkjaer confirmed this to Inside Retail magazine. “What happens in Malaysia and the Philippines is that we go in and… we must create the best shopping destinations in that country either alone or with somebody else.” “Of course, not everybody in the Philippines can afford us today, but we will work on that and adapt our range and become better and better to become Lazada ahead in PH e-commerce market The e-commerce market has continued to spur growth in the local scene, with online marketplace Lazada leading the game last year. According to a report of Malaysia- based iPrice Group, the local e-commerce market remained its strong momentum last year amid the increasing internet and smartphone penetration in the country. The industry amassed 34 million users in 2017, it said. For the last quarter of 2017, Lazada defeated other e-commerce players, posting 25% growth to 82.9 million monthly visits online. This was “10 times bigger” than its “strongest competitor” mobile shopping platform Shopee, which only recorded 8.57 million monthly visits. Open up, local governments told To ensure that economic gains are felt in the grassroots, local officials were urged to open up their localities to outside investors. National Economic and Development Authority (Neda) Director General Ernesto Pernia said that for PHILIPPINE RETAILING BOI approves 2 online retailers The Board of Investments (BOI) has pre-qualified Zalora Shopping and CJO Shopping Co. Ltd., the first two online retailers to be registered under the country’s domestic retail trade law. something for many more people,” he added. IKEA, which operates through a franchise system, is one of the world’s biggest franchisers and furniture retailers with 415 stores in 49 countries. So far, the BOI has already registered a total of 25 foreign retailers which created 29,000 jobs since 2000. BOI Director for legal and compliance services Marjorie O. Ramos-Samaniego, said both firms were subjected to the current rules under the Republic Act 8762 or the Domestic Retail Act of 2000. The law requires minimum capital requirement of $2.5 million. IKEA will be the latest addition to the SM Group’s growing international brands that already include Forever21, Crate & Barrel, Uniqlo, Ace Hardware, Alfamart and Watsons, among others. Since they have no physical stores, the online retailers’ warehouses will count as their store where under the law a retailer is required to invest $830,000 per store. (Philippine Star, 04/07/2018) In February, 2017, the Ayala Group Acquired 49-percent stake in BF Jade E-Service Philippines, which owns and operates Zalora Philippines, the country’s largest online fashion platform offering a wide range of fashion and lifestyle products. “So let’s see what is going to happen [in the Philippines], but the first one will be with SM.” Shopee beat fashion e-commerce player Zalora in the same period. Lazada also emerged as the most followed online platform on social media giants Facebook, Twitter, and Instagram. The group’s strong performance last year was also buoyed by its major campaign “The Online Revolution,” generating a total of $250 million gross merchandise volume. Given its boosted presence in the Southeast Asia region, global e-commerce giant Alibaba Group decided to raise its stake to Lazada through an additional investment of $2 billion last month, bringing its total ownership to 83% from the initial 51%. Last year, Zalora said it was investing in a new warehouse that is five times bigger than its existing facility in Carmona, Cavite to accommodate more volume on strong orders from online shoppers. CJ O Shopping Co., Ltd operates as an online shopping company based in South Korea which provides various shopping channels, such as TV home, T-commerce, Internet, and mobile shopping, as well as catalogue and e-Catalog services internationally. The company offers various product lines, including fashion, luxury goods, beauty, household appliances, jewelry, kitchen, household goods, and travel and baby products. (Manila Bulletin, 03/10/2018) iPrice Group expressed optimism that the country will continue to witness the sector growth, noting a study from Google and Temasek which stated that by 2025, the Philippine e-commerce is projected to be worth $19 billion. (Manila Times, 04/08/2018) provinces to spur economic growth, these shouldn’t hinder outside investors from doing business. to investors. Go said that business owners have encountered towns and provinces unfriendly to other business players. “They need to open up if they want better progress and see modernization of the town,” said Pernia He’s disappointed by Tagbilaran City, which has barred the entry of shopping mall giants. Since President Rodrigo Duterte’s win in the 2016 elections, his economic managers have been vocal about developing the countryside—urging players from various industries to relocate in other promising rural areas to create more jobs and decongest highly urbanized areas. Robert Go, PRA Cebu-Chapter president, also raised the concern of retailers that there are some towns and provinces that are not friendly Pernia told the business community of Cebu that now is the best time to invest as the country is experiencing stellar growth. (Sunstar, 4/23/2018) 5