AS ALLHOME SCALES UP OPERATIONS AND EXPANDS, IT HAS ADOPTED KEY STRATEGIES TO CUT COST, IMPROVE EFFICIENCY, LEVERAGE SYNERGIES, AND ENHANCE REVENUES AND PROFITABILITY

AllHome has successfully launched 18 in-house brands across various product categories — Rossio and Lustro for tiles, Brauhn and Teuer for sanitary products, Markel for hardware and Kreativ, Urban Reluxur and LiveArt for furniture.

Strategies

• Further expand the store network across the Philippines

AllHome intends to grow its business aggressively through the opening of new retail stores, both in cities where it has a presence and in other fast-growing cities across the Philippines, especially within Mega Manila.

It will leverage its experience from present operations and continue to replicate its  success as it expands store network.

About 20 stores are planned in the second half of 2019 and another 25 in 2020.

Its relationship with the Villar Group, with its substantial land bank and expanding project portfolio, provides AllHome with strategic access to a significant pool of potential sites for its expansion. It is also actively looking for expansion opportunities in other sites and areas with high growth potential and attractive market attributes.

AllHome aims to increase market penetration and establish a well-balanced geographic footprint to capture the growth trend in the home improvement retail market in the Philippines.

• Continue to expand its offering of in-house brand products

AllHome’s in-house brands currently represent 4.7% of total sales for the year ended Dec. 31, 2018.

It plans to continue expanding its selection of in-house brands across its product categories in the next two years and beyond to comprise up to 10% to 20% of revenues, further diversify its brand portfolio, optimize its product mix and enhance profit margins as AllHome in-house brands have gross profit margins that are approximately 15% to 25% higher than the margins from the sale of third-party brands.

AllHome has successfully launched 18 in-house brands across various product categories as of June 30, 2019, including Rossio and Lustro for tiles, Brauhn and Teuer for sanitary products, Markel for hardware and Kreativ, Urban Reluxur and LiveArt for furniture.

AllHome  will continue to leverage on its direct access to customers and unique insights into customer preferences to continue developing in-house products that are tailored and customized to its specifications.  It has engaged various manufacturers for the production of its in-house products which are sold exclusively in its stores.

AllHome’s in-house brand product offering will help improve margins and strengthen customer loyalty by offering high quality and exclusive products at competitive prices. AllHome will continue to capitalize on opportunities to roll out new in-house brands and increase revenue contribution from them.

• Introduce new format to expand its customer base

To further capitalize on the strong growth in the construction and housing market, AllHome intends to take advantage of its sourcing network and scale to expand its target customer base by acquiring market share in new customer segments.

Through strong collaboration with the Villar Group, AllHome has developed a deep understanding of builders and construction contractors in the Philippines.

Based on this understanding, extensive experience and past success, the company is  introducing the AllBuilders format. Six AllBuilders stores are planned in the second half of 2019.

The AllBuilders store format, with a focus on contractors and builders, offers a more extensive selection of hardware, tiles and sanitary wares, and construction materials.

AllBuilders stores will primarily be located outside of Mega Manila, where there is significant growth in construction activities and therefore demand for one-stop shop solution for a full range of construction related products in the coming years.

Contractors and builders’ bulk orders and higher transaction values will support growth.

• Continue to invest in technology and supply chain solutions

Through AllValue’s AllRewards loyalty program, AllHome has access to customer data to understand customer demographics, shopping frequency, spending power, tastes and preferences.

This information assists AllHome in fine-tuning product offering to identify and anticipate customer needs and buying patterns, among others.

AllHome will invest in store data systems to strengthen understanding of customer behavior, payment methods, and goods delivery options to enhance transaction-related services and identify trends to enable it to conduct more customized and targeted marketing to its customers.

Investing in technology will allow AllHome to enhance customer loyalty and acquire more customers.

AllHome will invest in its logistics system to allow efficiently manage its inventory and delivery operations.

This will allow the company to maintain an optimal level of inventory and properly time stock replenishment at its warehouses and retail stores.

It  will continue to work closely with its logistics service providers to scale their capacity in operations and intend to make investments to ensure sufficient capacity to support new stores and the expanding store network.

• Continue to enhance shopping experience to grow and retain customer base

AllHome will introduce initiatives to enhance the overall shopping experience across each of store formats.

To improve customer loyalty and satisfaction, AllHome plans to offer differentiated value-added services.

Currently, it offers interior design consultations and provide recommendations on AllHome products to suit a customer’s specific needs.

AllHome also offers door-to-door delivery and installation services at the customer’s convenience.

Personalized customer services will improve brand image and strengthen customer loyalty by fulfilling the diverse needs of customers.

It is also developing a training academy to educate all in- store staff which presents them with an up-to-date understanding of the evolving needs and tastes of customers, and to provide them with the necessary skills with respect to customer engagement.

In response to changing customer needs and preferences, AllHome will continue to regularly review and update store layout, optimize shelf space and upgrade store decoration to further improve the flow of traffic inside a store.

AllHome plans to host do-it-yourself workshops and similar events to introduce new products and share knowledge and experience on certain home improvement processes and products.

It intends to create more co-branding partnerships with our well-known suppliers to offer mutually beneficial promos that will also enable it to use suppliers’ brand equity to increase its own brand awareness and affinity.

 Online presence

Finally, AllHome plans to strengthen its online presence by launching its own e-commerce platform to reach a broader audience and cater to consumers in the digital era.

“We believe that establishing our own online sales channel will offer greater convenience to our customers, allowing them to view and purchase products, which would, in turn, complement our physical store network where our customers can see and touch our products and interact with our onsite staff. We believe that this strategy will provide a seamless experience across both the online and offline space and will lead to increases in sales,” says the company.

Milestones

AllHome was incorporated on May 29, 2013 and started operations with four stores.

It  opened its  first store in the Visayas region, AllHome Talisay in Cebu, in June 2016 and the first store in Mindanao, AllHome Cagayan de Oro, in July 2018.

In six years, AllHome has  grown big. It now operate 27 stores nationwide as of July 31, 2019. AllHome expects to introduce a new store format, AllBuilders, within the fourth quarter of 2019. The first AllBuilders store will be located in Dasmariñas, Cavite.

Allhome large mall-based stores

As of June 30, 2019, AllHome had18 large mall-based stores and expect to open four more mall-based stores in the second half of 2019.

The  large mall-based stores are located within shopping malls with an average net selling space of over 9,000 sqm, offering our full product line-up comprising over 250,000 SKUs.

The selection of products at mall-based stores are tailored to the needs of the community being served by the relevant mall.

Sales from large mall-based stores contributed 86% of revenues for the year ended Dec. 31, 2018 and 85% of revenues for the six months ended June 30, 2019.

AllHome large free-standing stores

As of June 30, 2019, AllHome had four large free-standing stores and expect to open four more large free-standing stores in the second half of 2019. Free-standing stores are large-scale retail locations with an average net selling space of over 8,200 sqm.

Similar to its large mall-based stores, the large free-standing stores offer full product line- up, carrying over 250,000 SKUs.

Sales from large free-standing stores contributed 11.6% of revenues for the year ended Dec. 31, 2018 and 13% of revenues for the six months ended June 30, 2019. 

AllHome small specialty stores

As of June 30, 2019, AllHome had three small specialty stores and expects to open six more small specialty stores in the second half of 2019.

The specialty stores are small format stores focused on offering select product categories.

Currently, the three small specialty stores are the appliance and hardware stores.

The appliance stores offer home and kitchen appliances, TV and entertainment products as well as digital and mobile devices, carrying over 10,000 SKUs.

Sales from the small specialty stores contributed 2.4% of revenues for the year ended Dec. 31, 2018 and 2% of revenues for the six months ended June 30, 2019.

AllBuilders stores

The AllBuilders store format will offer full product line-up carrying over 120,000 SKUs, and will have a more extensive selection of hardware, tiles and sanitary wares, and construction materials.

This format will focus on catering to the needs of contractors and builders with an expected net selling space of over 4,410 sqm.

AllBuilders stores will primarily be located outside of Mega Manila and may be situated alongside an AllHome store.

Six AllBuilders stores open in the second half of 2019.

Store network expansion plan

The plan is to open up to 20 stores in the second half of 2019 and up to 25 new stores for 2020.

A number of these stores are under construction with signed leases in place, while the remaining stores are covered by signed lease agreements.

These lease agreements are with various members of the Villar Group as lessor, and have been entered into an arm’s length basis.

New store development

The business development group is responsible for identifying sites for the construction of new stores, which in many cases are sites that are within the Villar Group’s properties, including the Vista Mall and Starmalls shopping centers.

The group determines the viability of a potential location for a new store based on a number of factors, including the demographics of the area, the size of the population, its income levels, local government and local infrastructure and support, and, in particular, proximity to residential developments.

The company also evaluates the presence of other retail developments and competitors in the area.

Before opening any new stores, AllHome consults business development and sales teams to ascertain the market trends and the latest market preferences.

The location for a store should ideally have a significant presence of families in the target market, the upper middle income to upper income segment, which according to a study by the PIDS has an average monthly household income of approximately P70,000 and above.

Once a location is selected, construction and fit-out of a store takes approximately four months.

A large mall-based store costs approximately P170 million to P180 million to establish and fit out; a large free-standing store costs approximately P160 million to P180 million to establish and fit out; and a small specialty store costs approximately P5 million to P10 million to establish and fit out.

The company says an AllBuilders store will cost approximately P42 million to P72 million to establish and fit out. Costs for establishment and fit-out of a store exclude initial inventory. Generally, store refurbishments are undertaken after five years, depending on the maturity of the mall and the market.

Key factor

A key factor in AllHome’s expansion strategy is the Villar Group’s property development plans.

AllHome wants to locate alongside Vista Land communities across the country.

Vista Land provides business development opportunities for AllHome and where Vista Land breaks new ground or develops new projects or communicities on existing developments, there will be new homeowners to whom we can offer our products and services.

In the second half of 2019, AllHome plans to open 12 new stores in Mega Manila, four in Luzon (outside Mega Manila) and four in Mindanao, for a total of 20 new stores.

As of July 31, 2019, it has opened two of the 12 planned new stores in Mega Manila (AllHome Malolos, Bulacan and AllHome Dasmariñas, Cavite).

Store layout

The design of each store is tailored to suit and address the needs of the relevant target market where the store is located. The store layout implemented across all store formats adheres to the following principles:

• Each product category is allocated a certain percentage of selling space;

• Approximately 10% to 15% of a store’s gross floor area is allocated as warehouse space;

• Uniform signage is maintained to guide customers across the floor;

• Vertical displays or stacking of products is utilized to maximize air space; and

• Showroom displays and vignettes are regularly updated.

Market outlook

Expansion into high-growth provincial cities and growth in ecommerce will provide vast opportunities

While the bulk of the retail value of the consumer appliance industry is generated in the NCR during the review period, expansion to provincial areas is expected to be the key driver of growth for the forecast period. Markets in key cities are becoming increasingly saturated, and retailers are expected to shift their attention to fast-growing second-tier cities and under-served provincial areas.

As consumers in such cities become financially ready for their first big-ticket purchases, the consumer appliance industry is expected to enjoy tremendous growth opportunities.

Store-based retailing is expected to dominate the industry, but ecommerce in the Philippines is also expected to experience rapid growth during the forecast period, as consumers start to get comfortable with online purchases of low-value items such as clothing and cosmetics or electronic accessory products.

As after-sales service and returns terms and conditions improve, Filipino consumers are expected to gain greater confidence in purchasing high-value items online (such as consumer appliances). In turn, it will create great opportunities for retailers who have a comprehensive online presence and can reach out to regions or areas in which they do not have a physical presence. n