A new force in retail

There will always be something new at the 61 outlets of Watsons Your Personal Store. That’s the promise of Dennis Casey, managing director of Watsons Personal Care Stores (Phils) Inc. "Our stores are designed around the ‘discovery’ concept where consumers have a wide variety of products to choose from at great value. We’re constantly on the look out for new products and for old products with a fresh look or twist," he said.

Given the diversity of products on the shelves, about 80% of Watson’s total sales are unplanned or impulse purchases.

Watsons opened its 60th and 61st stores last Friday at SM Megamall and The Podium, both part of the 40% equity of SM Inc. in the joint venture with Hong Kong-based A.S.Watson & Co., a wholly owned subsidiary of Hutchison Whampoa Ltd. Both stores carry the beauty and drug format, with the sale of over-the counter medicines (including Chinese medicine already being sold locally) accounting for 20% of the product mix.

Supply end

The joint venture heavily draws on the wide supply network of both partners. "Competition is at the supply rather than at the retail end. Because our stores must quickly adapt to rapid changes in consumer tastes, we’re pulling the stops on deliveries within two weeks," said Casey.

Right now, only 10% of Watsons products are imported, drawing on more than 25,000 products from more than 20 countries that supply its 630 stores in the region. (The 10% is well below the 30% import ceiling set under the Retail Trade Liberalization Law).

The balance 90% are initially sourced from SM’s existing suppliers, which must, however, show that they can deliver products in the right quantities at the right price within an increasingly short time frame.

That network will eventually include new local suppliers offering interesting and innovative products. "We’re looking at selling Philippine products, particularly those in sachets, in our other stores in the region," said Ian Wade, group managing director of A.S. Watson & Co. Ltd. Aside from its variety stores, the Watson Group also owns the ParkNShop supermarket chain.

A little history

In a way, the joint venture took all of 15 years to develop, the time that SM founder Henry Sy has known Hutchison chairman Li Ka-Shing.

Through those years, the two tycoons maintained a cordial relationship even when Li vowed never to return to the Philippines after Hutchison’s winning bid for the Subic Bay port development in 1996 was renegotiated.

"Getting the right partner was critical," said Wade, who began looking at the Philippines after the retail industry was liberalized. The sentiment was echoed by Sy’s two sons, SM Prime Holdings Inc. senior vice-president for real estate development Henry Sy, Jr., and SM vice-president for merchandising, Harly Sy. "There was an opportunity to do business with someone we trusted and we took it," said the younger Sy brother.

The economics were equally important. "We wanted to expand our market reach and Watsons has a strong brand identity," said SM president Teresita Sy-Coson. "Teaming up with SM allowed us to reach a critical mass to build market share," said Wade.

Watsons will increase its Philippine operations by 15 stores this year and by another 20 next year. Including inventory, each store will cost $800,000 to put up.

In the medium-term, Watsons is looking at a 250-store chain, a conservative number given that it would take about 3,000 drugstores alone to service the needs of 78 million. "We’re not limited to the SM malls, although we will be in all of them. We also want to develop outside Metro Manila," said Wade. To date, other mall developers have shown interest in leasing space to Watsons. Also being seriously studied are stand-alones, which will allow the company to keep longer store hours.

All that money being pumped in more Watsons variety stores spells more jobs, both at the store level and on the supply side. That will probably please the SM founder, who has, twice before, shown his confidence in politically-unsettling times by putting his money where his heart is.