THE STORY OF HENRY SY
'Opportunity is where you find it, not where it finds you'
Posted: 7:34 PM | Oct. 23, 2005
Inquirer News Service
Published on Page B2-1 of the October 24, 2005 issue of the Philippine Daily Inquirer
(Speech delivered by SM Group CEO Ms Teresita T. Sy at the Management Association of the Philippines' (MAP) 4th International CEO Conference last Oct. 19, 2005)
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SURVIVING DURING A TIME of crisis is a matter of choice. We have learned from our own experience that going into business and staying in it during difficult times is a deliberate choice one makes. You have to want to weather through the tough times.
And while we may have little control over external factors during crises, we can in a way control our destinies by the choices we make. Many things will depend on your own survival instinct, as in many things in life.
All of us here have our own concept (or theory) of business. Some of us think of it as a need, others see it as an exciting endeavor, and there are those of us who think of it as too stressful, especially during slow economic times like this.
Business is the same at all times. When times are good, there is a lot of demand, and that gives rise to a lot of competitiveness and the need for innovations. When times are bad, the market contracts with the many players sharing the same shrinking market. But you still have competition and still need innovations. So whether it be good or bad times, you have competition and stress.
In good times, you have a lot of opportunities. In bad times, you have lesser, but nonetheless you still have opportunities.
Our company, SM, as many of you may already know, came from the hard work of my dad, Henry Sy Sr. It is a rags to riches story that even myself did not realize until I went to trace his roots in China. His journey from the thatched hut I saw there to the shopping centers he has today is something that amazes even myself. His determination, his discipline, and his thriftiness have produced an astute and street smart businessman who has influenced a lot of people, including us, his children.
Our company has done pretty well during bad times, not that we need bad times to prosper. My father's perseverance during the different crises our country has gone through made our active business pursuits possible for half a century. True, he was disappointed with the economy many times, but he never saw the reason to quit and instead pursued his goals relentlessly. He had many obstacles--both external and internal--in his business, and there were times he could not understand why things had to be so complicated for him to pursue his business objectives. Yet, he persisted through all economic and political times.
From the bottom
It has been written--and I can attest that it is true--that Henry Sy started from the bottom. He came to the Philippines at the young age of 12, and worked in his father's small sari-sari store more than 12 hours every day to help him. There, he devised ways to increase his income by developing small portions of products--much like the sachets we see today in the supermarkets. He was able to make multiple sales in order to make extra income, spending so much time in the store that he had no time to go out and play with friends in the neighborhood. It did not take a long time for him to realize, however, that he can only do so much in a sari-sari store environment.
WWII came and the sari-sari store was looted and burned. He did a lot of buying and selling of odd things during the war to enable the family to survive. This must have provided him the hands-on training for his stamina in business. At one time, he was hit by shrapnel while selling, and quite fortunately was brought to the hospital by his good friend in a kariton [cart-ed]. Without that friend, he could have bled to death. He treasured that friendship and later expressed his gratitude after the war by making that friend his partner in a shoe store. The partnership lasted for more than 40 years until the shoe store had to give way to the building renovations of the lessor.
After the war ended in 1945, he ventured into selling American shoes imported by enterprising GIs. He later saw the opportunities of opening a shoe store, and not long after was managing three shoe stores in partnership with friends.
With the pressure of a growing family while at the same time pursuing his studies at FEU in the early '50s, he sought more ways to augment his income. He studied the market and decided to be different. While other young men went to the US to pursue a higher education, he went on a long business trip to the East Coast, and came home with a lot of merchandising ideas. For a time, he was selling a lot of shoes, accessories, and leather goods, hoping to change the way shoe manufacturers look at the industry.
First shoe store
Sensing a lot of opportunities, he decided to open Shoemart, the first air-conditioned shoe store that merchandised shoes in a very inviting and classy format. With the success of that store, he went on to open more shoe stores, but he could not get enough suppliers. Many shoe manufacturers at that time could not understand why they had to listen to this shoe retailer who had very definite ideas on what he wanted to sell. They did not cooperate by providing him with the volume he needed, and because of that limitation, he gradually shifted to apparel--and thereafter other merchandise--with the help of my mother. He was continuously learning from his customers, suppliers, and employees. This on-the-job research gave him enough confidence to expand to a department store chain.
Many things in life grow out of needs, and to meet the needs, you become determined. With determination you will take extra challenges and do things differently-which will most likely bring success.
We opened our first department store in 1972, two months after martial law was declared. The business had a slow start, but progressed steadily. During the martial law years, he continued to open more department stores, reaching a point wherein he could not get space he needed in the existing shopping centers during that time. He then decided to think long term, and invest in properties for malls, which were patterned after the American suburban shopping centers, which he had been studying for sometime.
When we started the construction of our first mall in 1983, the Philippines was in the midst of a debt moratorium and experiencing hyper inflation. The economy's decline was further aggravated by the assassination of Ninoy Aquino. Many bankers predicted our demise because my Dad came from nowhere--he may have a few department stores and shoe stores at that time, but he was not one of the financial heavyweights at that time. Unaffected by criticism, and armed with sheer determination and optimism, he persisted and opened in 1985 with our department store and supermarket and a few tenants. Many potential lessees were saying no to lease offers.
At about the same time, given the social unrest of the times, our own Shoemart Makati store was faced with ugly strikes. He almost gave up, but through the encouragement of his employees and customers, he continued. At that time, he decided emotionally draining disturbances should not overpower him or detract him from his goals. Since that time, he has not faltered in his confidence, and became even more determined to continue the business. He also convinced everyone of us in the organization to follow his optimism.
Baptism of fire
Later, we expanded, slowly building malls at that time to get our formula right. The expansion was not without difficulties. When constructing Sta. Mesa and Megamall, we were faced with delays in construction due to cement shortages, the 1989 coups, and the lawsuits of our partners in Megamall. The latter arose from a misunderstanding that we were opening other malls at their expense, and from their inability to understand the shopping center business, which was a long-term investment and therefore could not produce short-term income. That was our baptism of fire in the real world of the courts and the media.
This experience taught us many things about business. During the time the case was active, my Dad remained steadfast in continuing what was right for the business, treating it the same way with or without partners. He believes that during times of crises, we should not have internal problems among shareholders as it makes things more complicated. Rather than focus on internal squabbling, we should focus our attention on meeting the demands of our market and outside competition.
The problem was later resolved, and the partnership focused on the core business of shopping center operations. It also brought in good revenues, and there were less animosity in the discussions as these centered more on dividend payout schedules.
When the 1997 Asian crisis came, we were planning our mall expansion, including the Mall of Asia, which was then envisioned to be the biggest mall in the region. Because my Dad felt the tsunami-like effects of the regionwide crisis, which was unlike any other he had experienced, we had to change plans. We deferred opening the Mall of Asia, and went on with the opening of other malls.
Beyond department stores
We grew in numbers instead of size, serving different smaller markets. At present, we are opening three or four shopping centers a year. We have also expanded our retail business beyond department stores to include supermarkets, hardware stores, appliance superstores, and other retail formats.
At about the same time, we looked into the banking business--both at our bank and at the industry. At the time, our main bank, Banco de Oro, was a medium-sized bank. Because we were quite conservative in lending, the deluge of bad loans that characterized the times did not affect us. Given that, we thought it was an opportune time to grow amidst some instabilities.
We reorganized and strengthened our organizations for about three years and developed growth strategies that started in the year 2000. Encouraged by the consolidation program of BSP in making Philippine banks more competitive relative to the region, Banco de Oro made a few acquisitions because of the moratorium on banking. It acquired the Dao Heng Philippines branch, the First E-Bank, the Banco Santander Philippines branch, and most recently, the UOB branches. We view our recent foray into Equitable PCI Bank as an opportunistic purchase--it is a potentially good investment if we have enough patience to whether its controversies. In another front, our purchase in San Miguel runs along the same rationale.
Opportunity is where you find it, not where it finds you. Crisis and weakness indicate where one can look for opportunities. Transforming problems into opportunities can bring good returns. Prosperity and growth come only to a business that systematically exploits its potentials and systematically optimizes its performances.
Our business--especially that of shopping centers--is a long-term business. It takes at least eight years to pay back. We feel that the country will always be around, and with the Filipino's love for shopping, there will always be customers we can sell to.
Our retail business is still going forward despite the fact that there are a lot of competitions and the market is not exactly growing because of the economic times. Expansion is necessary to keep our sales going and to maintain some growth. It is not a great time, but we have to persist. We have to re-create and reinvent ourselves from time to time. Our Makati store has been renovated to serve more sophisticated customers. Our Mall of Asia, which will be opening soon, will give a different shopping experience.
We also have to continuously innovate. Our other retail formats like supermarkets, hardware stores, appliance stores, home stores, toy superstores, baby stores, and Watsons are continuously evolving with the shopping habits of our customers. Because they frequently visit the store, we make sure we have new products all the time so that their shopping experience will not be boring.
Our group's policy is to look for opportunities at all times, and to be ready to act when it comes. While crises may have brought opportunities, we continue our plans in good or bad times with some changes to suit the demands of the time. Sometimes, we accelerate, sometimes we reduce the speed. But we never put on the brakes completely. The slow, steady and consistent churning of our machinery-our financial as well as human resources-has given us the focus to grow into the size we have today. We do not stop growing during crises.
Our company has done well during times of crises-not that we need these crises to prosper. It has grown from an entrepreneurial proprietorship to a family business to a large corporation during the different economic and political crises.
Like other companies in the Asian region, we constantly build a culture of perpetual crisis in our group to survive.
There is growth and there are opportunities in time of crisis-we just have to make the choice to survive and the choice to navigate through these rough waters.
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Source: http://money.inq7.net/features/view_features.php?yyyy=2005&mon=10&dd=24&file=2
