Rey Odtohan

Entrepreneurship

From Rags to Riches: They Story of SM Tycoon Henry Sy

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.

My father’s perseverance during the different crises our country has gone through has made our
active business pursuits possible for a half 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.

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 everyday to help him. It was located on Echague St., which is now Carlos
Palanca Sr. St. in Quiapo, Manila. 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.

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 away 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 he was managing
three shoe store in partnership with friends.
 With the pleasure of a growing family while at the same time pursuing 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.

Sensing a lot of opportunities, he decided to open SHOE MART – “SM” – 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 think long term, and invest in properties for malls,
which were patterned after suburban shopping centers, which he had been studying for some time.

When we started the construction of our first mall in 1983, the Philippines was in the midst of a
debt moratorium and experienced hyper inflation. The economy decline was further aggravated by the
assassination of Ninoy Aquino. Many bankers predicted our demise because my dad came from
nowhere – he may had a few department stores and shoe stores at that time, but he was not one of the
financial heavy-weights 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 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.
 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 and the 1989 coups.

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 region wide 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.

We grew in numbers instead of size, serving different smaller markets. 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 Central Bank of the Philippines (BSP) in making
Philippine banks more competitive relative to the region, Banco De Oro made few acquisitions because
of the moratorium on banking. It acquired the Dao Heng Philippines branch, the First eBank, the Banco
Santander Philippines branch, the United Overseas Bank branches, and most recently – Equitable PCI
Bank.

Opportunity is where you find it, not where it finds you. Crisis and weakness indicate 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 Filipinos’ love for shopping,
there will always be customers we can sell to.

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 our demands of the time.

May Henry Sy’s success rubs off to us as well. As a final note, I would like to leave this quote
from Henry Sy: ““There is no such thing as overnight success or easy money. If you fail, do not be
discouraged; try again. When you do well, do not change your ways. Success is not just good luck: it is a
combination of hard work, good credit standing, opportunity, readiness and timing. Success will not last
if you do not take care of it.”