COVER (Clockwise, from far left: Rick Santos, Steven Tan, Ana de Ocampo, Paulo Campos III, Peter Faulhaber, and Amit Oberoi
Over lunch, six business leaders talk about how they weathered Covid’s challenges and how they are bracing up for a brighter future. Tatler talks to Zalora’s Paulo Campos III, Wildflour’s Ana de Ocampo, HSBC’s Peter Faulhaber, Shangri-La’s Amit Oberoi, Santos Knight Frank’s Rick Santos and SM’s Steven Tan
Tatler Philippines: Thank you all for being here. Basically, we wanted to start with the challenges you all faced in the past two years. How did you address them and where are you now?
Steven Tan (ST): It was the first time in 62 years that SM closed shop! We opened our first shoe store in 1958 and only in 2020 did we close our malls. For two months. But of course, it depends on you if you’re just going to wait or if you’re going to do something about it.
For us in SM, we accelerated our own e-commerce. We went into omni channels. We had personal shoppers in all our malls, in Metro Manila and in the provinces. Grab was not there yet, particularly in our malls in the provinces. So, we contacted the displaced jeepney and tricycle drivers to help us with the deliveries. They acted as our third-party delivery. This gave them livelihood and at the same time helped our business. In times of crisis, you tend to help each other more; and this is very Filipino. This is the beauty the pandemic brought out.
Paulo Campos III (PC): Online was the only way you could shop for some time so there was really a tremendous acceleration of e-commerce adoption. Our estimate is about five years’ worth of new customer adoption of e-commerce in just the first year of the pandemic. Of course, it presented challenges too. Like, ensuring that we could keep up with the supply chain, logistics, sourcing…and increasing customer expectations.
The biggest trend we saw was that consumers are now buying a wider range of categories. And the amazing growth in online grocery. This behaviour did not exist pre-pandemic. My wife and I alone depend on aggregators for our supply of food. And we think all these trends are here to stay.
Ana de Ocampo (AdO): Our brand was able to pivot by putting up more pillars, like delivery which was zero, pre-pandemic. We also built a pantry where we sell stuff made in our kitchen, including branded consumer products which we will launch soon.
During the pandemic, I also realised that data and information are important. I formed a team of (kinda weird for a restaurant) industrial engineers who give me all the metrics and analytics on which I can base my decisions. And it really helps a lot. Sometimes I can’t function without first checking.
Dining is coming back, but delivery is one pillar that we will continue to strengthen because we see an opportunity here.
Amit Oberoi (AO): This hotel really needs business travel, big events, and the infrastructure around it to be successful. During the pandemic, a lot of effort was made to create products that the people were looking for and do deliveries. But most of our foods are not suitable for travel. So for us, we need people to really come here.
Peter Faulhaber (PF): For me, one of the many challenges of many industries, including banking, is the wellness/mental health aspect. We spent 2020 locked in our apartments and houses in meetings and Zooms. What used to be a two-minute conversation by the water station in the office easily extended to longer on Zoom with ten other people. People were burning out from working way too much in the past two years. We knew this was not sustainable. So, we tried to limit meeting lengths and the number of attendees. We used other technologies to not have to talk to ten different people. We assessed what support we could provide our employees that will help with everyone’s mental wellness, like providing seminars to manage stress, wellness activities, and professional services they can run to. We also implemented our SIX Focused hours, allowing employees to knock off work early on a Friday or have a no-meeting Friday every month. But we still reached peak Covid, peak Zoom. So we are back in the office now, at 100 per cent office capacity.
Rick Santos (RS): The lockdown for two years was, I guess, most devastating for hotel and tourism, then retail. Offices slowed down. But the beds, meds, and sheds grew. Data centres picked up—that’s the new thing—despite the high cost of power—also, REITs. The law was passed ten years ago, but rules and regulations were implemented just a couple of years ago. So, we saw several big conglomerates launch their REITs.
We’re looking forward to recovering. The hardest-hit sectors should have the most to gain. Retail should be a gainer. And hotel and travel. The island resorts were probably one of the hardest hits because of the problem of getting there. Fortunately, business travel is starting again.
I agree with Peter that all this work from home and Zoom meetings can be draining, and now the most important thing is getting the people back to the office.
AO: I think most of the people resisting going back to the office is less about getting the Covid, but more about avoiding the commute. But this is not good. At some point, you need to get to know whom you are working with, at the same time be able to have an exchange of ideas.
AdO: In my case, a lot of my staff have kids who are still in school. So, they need to tutor them at home.
TP: Are things getting back to normal? How are you preparing yourself for the change?
AO: Covid is not over. But I don’t think everyone has the mental strength for [another lockdown].
PC: We see this too in our business. Even if there was a major channel shift towards e-commerce in 2020, in 2021 the story was more about the uncertainty of the future. And thus, this macro-economic consumer crunch. Consumers were not spending because they just did not know for how long they will be in this.
However, we see the fear easing tremendously. We see this in the type of products Zalora sells—more discretionary spend, more lifestyle spend, occasion wear.
AO: Do you see people buying for convenience rather than for safety?
PC: Very much so. For the convenience. Now they are spending again and seeing the light at the end of the tunnel. Now, they’re making those purchases that they have put off. In 2021, our sales plummeted when there was an announcement of a change in alert levels to be stricter. This is not the case anymore, so it’s very promising for us.
TP: What about grocery?
ST: Since the start of the pandemic till now, grocery has remained stable. Never [went down] and even actually grew during the pandemic.
PF: It feels like things are back to normal. But it’s more of the new normal as opposed to what we had three years ago. Banking will always remain a relationship type of business. People still prefer calling their bank manager or relationship manager rather than do a transaction online even though the capability exists. But now, more and more clients are becoming comfortable with the digital technology that is available.
TP: What about the foot traffic in the malls?
ST: Even with the Omicron, January this year was better than January last year. It was like 60 per cent of 2019 sales. But in February it grew to 70 per cent and in March, 80 per cent. Then in April, we hit 90 per cent!
On a closer look, we found out that the Metro Manila malls did not perform as well as community malls. On weekends, sales were so strong; on weekdays, that’s when we needed the push. And we discovered this is essentially because of the work-from-home set-up.
TP: But are you taking all the precautions necessary?
ST: Yes of course. You must do things differently now. Even the products they are selling in the stores are totally different. Sportswear and sanitisers have really shot up.
AdO: I think people also like going back to the brands that they are comfortable with. But customers nitpick now more than ever. They really want their money’s worth, but they also go back to the brands they trust the most.
PF: From a physical safety standpoint, we have kept our branches open since March 2020, assisted people going to and from work, and provided all the health and safety measures in the branch—for our customers and our front liners.
RS: I think the big issue in real estate was just a return to the office. Whether it’s 100 per cent or WFH or hybrid. People don’t want to pay for the commute, and they are getting used to WFH. But then again, a lot of people are getting Covid brain. You put somebody in solitary confinement for 40 days and they start to lose it. It’s good to get people back to the office. It’s good to get people restarted again.
TP: But what about the price of real estate?
RS: Globally, you’ve seen people flock to the beach or the mountains or resort areas. Baguio has also gone up. People want to go out of town. So for residential, beds have been strong. And even golf club shares have gone up. Now people want to get out, to have leisure.
Condominiums here have been under more pressure. And their rates have gone down for rentals. Capital values have also been priced lower. Good time for somebody to renegotiate his retail rents probably.
I think you will see a pickup in Q3 and Q4. We will see an unfreezing, people needing to sell, people needing to buy. People repositioning with the new regime. People selling because they are not aligned; people are selling because they are super aligned. I think the office sector will pick up again. It was challenging to get people into the restaurants before. But I think we will see exciting trends coming up.
ST: We have added so many bicycle racks in our malls. As I have said, it has changed so much in the past three years. You would never see people with pets. Before, they were not allowed to bring them to the shopping centres. Now we encourage them.
PC: They say plants are the new pets and pets are the new children.
AdO: Pre-pandemic, we asked our landlord permission to put up bike racks, and they said no. But when the pandemic hit, they were encouraging this. A lot of people are using their bikes and scooters more. Maybe because of the gas prices.
ST: Or some people are still not comfortable taking public transport yet. We also provide shower rooms now in our offices. A lot of them bike to work. They get sweaty, and they need to change clothes. These are the things you didn’t usually do pre-pandemic times. We’ve made so many changes.
TP: How does the SM track work?
ST: Deliverables. Reports. At the end of the week. But again, this is mostly digital and IT.
RS: It’s bizarre. You sometimes go to a person to check on productivity. They have this and that, so they cannot go to the office, but when you say there is a conference in Dubai, they will immediately say, “I can attend that.” I don’t understand.
AO: Many of my guests are telling me that staff who are claiming to have not been vaccinated just do not want to go to the office for personal reasons.
AdO: And some of them have more than one job. They are actually moonlighting.
TP: Do you see possible problems with logistical concerns and a possible recession due to the war in Europe?
AdO: Fries, for instance, is suffering a shortage. So, we make our own! We used to make our own before, but it was a long process. But now we’re back to making our own fries when necessary.
ST: The zero Covid policy in China is hurting the supply chain. A lot of our supplies globally come from China.
PC: Certainly, a crunch is happening on the supply chain side. This means more focus on local brands, homegrown brands, and SMEs.
But maybe I can bring some good news in. Specifically for the Philippines, we’re seeing the early stages of start-up and venture space. The Philippines is now on the map as one of the most exciting countries globally. For the past years, much of the venture capital investment in Southeast Asia has been going to Indonesia.
Now, that’s completely changed because of this acceleration of customer behaviour that I mentioned earlier. Investors are now looking to the Philippines and Vietnam as the two markets in Southeast Asia that are the most exciting for new tech ventures.
The Philippines is also leading the way in some of these new blockchain technologies, mostly blockchain gaming. We are not only following and copycatting but leapfrogging in many cases. I think we are the third or fourth country with the highest crypto adoption—four million Filipinos with some adoption of cryptos, primarily in gaming technology.
This is a new engine of growth which will create new jobs. Perfect for Filipino skills. Our ability to be very digital, very cosmopolitan, and plugged into the global economy.
RS: What about NFTs?
PC: Very much so. About 15 per cent of all MetaMask wallets are in the Philippines. There is another trend involving Filipinos working abroad but seriously thinking of going back. Repatriating. Starting new companies here and being the creative force in this creative destruction that we see in the economy. So, I think those are the specific trends. Investor interest and the new realisation of what’s important. Like finding fulfilment and meaning? This will define the new entrepreneurs of tomorrow.
TP: So, are we all ready to face the future?
ST: We’ve always been ready! And we understand it [Covid] more.
PF: I must say, I don’t think there are many countries in the world that could have survived the harshness of the lockdowns that we had. The Filipinos are so resilient, bouncing back, ready to go.