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Why does SM still maintains the former MAKRO in Mandaue when people can go to SM City Cebu Supermarket Section?

Makro was a famous global membership-only warehouse shopping chain. During its peak, it had 15 warehouses across the Philippines. Makro was a haven for hard-to-find foreign products and provided its members great discounts on bulk purchasing. But with declining interest in the membership shopping concept – and with the onset of the 2008 global recession – Makro struggled financially.  That led to SM Group acquiring 100% equity of Makro in 2007. Due to the acquisition, all 15 branches were converted to Hypermarkets.

But there is one interesting branch of Makro in Cebu – its distance to SM City Cebu is just a mere 1.1 kilometers. An obvious decision the SM can make is either close this particular Makro branch and develop the land into something more profitable. Rather, SM decided to convert it into a Hypermarket – just like what it did to all remaining Makro branches in the country.

So why in the world would SM maintain a Makro outlet that is an obvious competitor to its City Mall? Wouldn’t it be more profitable to direct all traffic to the City Mall as people would be tempted to purchase more (eat, watch a movie, visit the department store, etc.)?

Former MAKRO in Cebu

What is the logic behind this?One main probable reason for that is the diversification of SM. We all know how SM likes to increase its portfolio—be it from retail to housing. What they intend is to capture a bigger market share in the supermarket business.

Another reason to maintain the property and convert it to a hypermarket may due to SM factoring buying patterns. They intend to keep the property as a grocery chain to answer to the demand of a hassle-free grocery shopping. Rather than be tempted to stroll and spend more in Malls, some consumers prefer to have a “peace of mind” when buying their groceries.

A probable reason for maintaining the location is for it to be a go-to-place for food services who wishes to buy in bulk. Rather than visit the Mall in which parking might be a hassle for their trucks and that they will have to endure long lines to the checkout counter, they can just visit the nearby hypermarket where they can save time and logistics is way easier.

And last probable reason, is that SM want to use its Hypermarkets chain to compete with city markets like Carbon – and not necessarily to compete with its sister grocery chains. Most of its products are fresh meat, seafood, fruits, and vegetables. But rather than visit a more-crowded and hot market like Carbon which security might be a cause of concern,

SM Hypermarket Cebu (former MAKRO)

buyers are given a better alternative as they can visit a hypermarket which acts like a first-rate indoor wet market, food and general merchandise store to provide one-stop shopping convenience for shoppers everywhere.

One advantage of SM Hypermarket compare to SM Supermarket is some products are cheaper like fish which is P10-P20 cheaper than in SM City Cebu. It also became a testing ground for SM to introduce new concepts of shopping experience from a chicken rotisserie stall, to a bakery stall and a dampa-style dining. As of 2018, the first two of the three I cited are now present in the supermarket floor of SM City Cebu – something that was not present when this post was written in 2014.

First written in 2014. Major issues were made in 2018.


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This entry was posted on November 19, 2012 by in Rejected Essays and tagged , , , , , , , , , .

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