Interviewee: Charissa Lee Dy Mai

VP for Marketing, Sio Mai (SM) SuperMall

Km. 3, Magsaysay Avenue, La Trinidad, Benguet

Interviewer: Marcus Jack Jamo

Senior Analyst, Digital Business Marketing Solutions (DBMS), Inc.

Date of Interview: 12 August 2013

Excerpts of Interview:

MJ: So how does one get to set up shop at SM?

CM: Well, companies interested in renting stalls at SM have to apply for such stalls first. We have a Stall Rental
Application Form, or what we call SRAF, which is available at our Marketing Department for this purpose.
They can also use the SRAF we have online at our website, www.sm.com.ph, although for those who do so,
they still have to submit other required documents at our Marketing Department. The SRAF, along with all
other required documents, must be received by our office at least sixty days prior to the intended date of
occupancy, so that we will have ample time to evaluate and process the application.

MJ: What are these other required documents that are to be submitted along with the SRAF?
CM: I don’t have the complete list as of the moment, but there are several such requirements. The more
important ones will be a certified true copy of the applicant company’s business permit from DTI, as well as
the company’s income tax returns for the three years immediately preceding the application. We prefer to
deal with companies that are more or less well-established already, though we also extend considerations
for startup companies as well. Prospective stall owners who have been in operation for less than three years
are required to submit additional documents, like, for example, their financial statement or their statement
of assets and liabilities. Sometimes we also require bank certifications about existing accounts in the
company’s name, or similar documents that allow us to establish the company’s financial standing. You can
ask for a complete list of the requirements from our Marketing Director. I think these are also listed online.

MJ: Should these requirements be submitted all at the same time?

CM: Not necessarily. We usually keep a file of pending applications, with a checklist of the requirements that the
applicants have already submitted, as well as those that they haven’t yet. We don’t process an application
until the requirements are complete though.

MJ: I see. Okay, so assuming that a prospective stall owner has already submitted the SRAF and all other
required documents, what happens next?
CM: We have a screening committee that is tasked with the evaluation of the applications. The committee
usually meets once a month. In each meeting, up to three different applications are scheduled for
evaluation. There are times when many applications are submitted, and in those cases, the committee can
schedule extra meetings to process the applications. We evaluate applications strictly on a first-come,
first-served basis.

MJ: I assume not all applications get approved?

CM: That’s right. Our evaluation committee takes several factors into consideration when processing a
particular application. We consider it very important that the applying company is financially stable, as
evidenced by the documents provided with the application. We also take into consideration the line of
business the company is involved in, as well as the availability of the stall or stalls that they plan to rent and
the length of time they intend to do so.

MJ: So you mean an applicant can apply for more than one stall?
CM: Normally, a company applies for the rental of a single stall only, but we do allow applicants to apply for
several stalls. The only requirement in such cases is that all such stalls be used specifically for the line of
business in which the applicant company is involved in. In such multiple stall applications, the stalls applied
for are typically adjacent to one another. Most of our adjacent stalls have collapsible partitions, so if they are
rented by the same company, those partitions can be removed to make the stalls appear like one large stall
instead of two or more adjacent stalls. You may have noticed the area occupied by WagWagWears, for
example, which actually are two stalls collapsed into one bigger stall. We’ve also had cases in which a
company has two or more separate stalls. Augusta, for example, has two separate stalls, one at the first
floor and another at the third floor.

MJ: How about the rental period? Is there a minimum or a maximum rental period?
CM: We require the rental period to be an integral number of months. The minimum is one month and the
maximum is thirty-six months, or three years. The stalls that are being applied for, the rental period, as well
as the intended date of occupancy are specified in the SRAF, by the way.

MJ: Okay. So how will the applicants be notified of the status of their applications?
CM: For disapproved applications, we notify the applicant about the decision and an indication of why the
application was disapproved. This notice is typically received by the applicant within a week’s time after the
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 evaluation of the application. Our committee’s decision cannot be appealed. Furthermore, we don’t allow
the same company to apply again within a period of six months after a disapproved application.

MJ: And for the approved ones?

CM: Once an application is approved, the applicant is notified within three days after the approval date and they
are required to confirm their intentions of occupying the stall, or stalls, in case they applied for more than
one, within a week’s time after notification. There are some cases where we may be able to accommodate
an application, but only if the applicant is willing to defer occupancy to a later date than the one indicated in
the SRAF, for example, if the stalls being applied for are still occupied. There are also situations in which we
cannot grant all the stalls being applied for, but we can accommodate the application if some stalls were
dropped from the original list, or if the applicant is willing to consider replacement stalls in lieu of those
which are not available. In those cases, we indicate such modified conditions in the approval notice to the
applicant, and they confirm with us if they are willing to wait or drop stalls or consider replacements. Once
we receive confirmation, a Stall Rental Contract, or SRC, is then drafted and sent to the applicant, indicating
the details of the terms of the rental. The applicant is given one week from the receipt of the SRC draft to
study and agree with the terms of the contract, which are final by the way, and communicate their decision
to us. Once an agreement is reached, a contract signing date is then scheduled, usually at least two weeks
before the planned date of stall occupancy. Unconfirmed approved applications or non-agreement with the
draft SRC terms are eventually treated in the same manner as rejected applications.

MJ: Can a company still renege on a contract after it has been signed, but before the occupancy date?
CM: Yes. Technically, the contract only becomes binding on the occupancy date stated in it, even if it was signed
earlier. It rarely happens, but in cases where it does happen, we charge a contract processing fee for those
contracts that are cancelled before the occupancy date, and then afterwards subject the applicant to a
similar proscription as that for disapproved applications, but for a longer period of one year. Contract
cancellations that occur after the occupancy date, on the other hand, are dealt with based on the
stipulations in the contract itself with regards contract pre-termination policies and, in most cases, the
attendant penalties for such. Usually the penalties are in terms of a percentage of the total rental fee for the
period specified in the contract, plus, possibly longer, in the worst case even perpetual, bans on subsequent
stall rental applications, depending on the circumstances pertinent to the contract cancellation.

MJ: Can SM terminate a contract prematurely?

CM: Yes. However, we only terminate contracts prematurely due to contract terms violations, for example,
delinquent payments or gross negligence or unfair or illegal business practices or non-conformance with
mall policies, on the part of the stall owner. There may also be cases when a stall owner simply abandons the
contract terms willfully, for example, if the company business goes under or in even just because of poor
sales. As I’ve already indicated earlier, such pre-termination scenarios are stipulated explicitly in the
contract. Any legalities arising from such cases are handled by our Legal Department.

MJ: Can contracts be renewed? Extended maybe?

CM: No, they cannot. In fact, SM doesn’t even allow modifications of contract terms within the specified contract
period. Once the contract is executed, it is either allowed to run its full terms, or terminated prematurely. In
cases where there might be valid grounds to render a contract null and void, the old contract is terminated
prematurely, and a new contract is executed in its stead with the new terms, all without prejudice to the
application of any pre-termination conditions that are stipulated in the old contract.
MJ: So what if a company is interested to extend its occupancy of a particular stall and its contract is already
expiring?
CM: In such cases, we require the company to re-apply for the stall before the contract expiration date. The
application is then treated like a new application, and is processed in the same manner as other applications.
The evaluation committee has certain guidelines in either favoring or not favoring re-applications of current
stall owners over other applications, usually based on the company’s history of having done business with
us. All things being equal, a current stall owner’s re-application usually gets preference over new
applications, though there may be exceptions. Once approved by the way, a re-application will then translate
into a new contract, with possibly different terms from the previous contract signed by the current stall
owner.

MJ: How do you charge the stall owners?

CM: For the stall rentals, you mean? Or including other fees such as utility charges and equipment rentals and
the like?

MJ: Let’s start with the stall rentals first.

CM: Okay. We have a certain classification that we’re using for our stalls, which is mainly based on the location of
the stall. For example, the stalls which are located near the mall center around the atrium are considered
premium stalls, since they get the most exposure to mall shoppers. The others are considered regular stalls.
Then there are those that we call “island stalls”, which basically are not physical stalls per se, but are rather
just delimited locations within the mall’s floor area, appropriate for curio shops and similar setups. We also
have a booth classification, normally reserved for small food stores that sell candies or ice cream and the
like. The booth stalls are somewhat special because the booth owners are allowed to move their booths
around in the mall, but only within the specific floor where they are located. We have unique identifications
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 for each of these stalls, and the stall IDs that are rented by a particular company are indicated so in the SRC.
For adjacent stalls rented by the same company, the individual stall IDs are indicated in the SRC, even if the
stall partitions have been collapsed to coalesce the stalls into one bigger stall.

MJ: So this classification determines the rental fee then?

CM: Yes. In addition, the stalls can vary in size, so we factor that in into the stall’s rental fee as well. Also, the line
of business for which the stall is used is also considered in the rental pricing. For example, we usually charge
higher additional rental fees for food and beverages type of businesses than we do for RTW shops. So
basically the rental fee is based on the type of the stall, its size, and the business category. When the SRC is
drafted, we specify the breakdown of the charges for each of these factors. If the contract is for several
stalls, a breakdown is provided for each individual stall and summarized for the entire contract. Once the
contract is signed, it is assumed that the stall owner already agrees with the rental fee as indicated in the
contract. The rental fee, by the way, is indicated as a monthly fee.

MJ: What about utilities?

CM: The main utility services we charge for are electricity and water services. With the exception of booths and
island stalls, all other stalls use electricity. We have electric meters installed in those stalls so as to keep
track of the renter’s energy consumption. Our rates are just a tad higher than the rates being charged by
BENECO for other commercial establishments, since we use backup generators to ensure continuous power
supply even when power outages occur.

MJ: And water services?

CM: Not all stalls need water services. Those that do are mostly the food shops. We have a similar scheme for
metering the water consumption of such shops as that for their electric consumption.

MJ: Any other utility services aside from electricity and water?
CM: Well, we also provide telecommunications services. We have trunk line connections to PLDT, Globe, Digitel,
and Smart, and shops that need phone services connect through our switchboard. These shops are charged
basic monthly rates, along with additional fees for long distance or international calls that originate from the
phones assigned to them. Their cellular phone services are no longer our concern though.

MJ: Anything else?

CM: We also charge security and janitorial service fees. We have some shops operating beyond our normal mall
hours, like the bars and food shops, for example, so the stall owners of these shops are charged slightly
higher security service charges than the other stall owners. There are also shops that avail of the mall’s
janitorial services, like Guapito’s Barber Shop and the food stalls at the basement, so these stall owners are
also charged extra. Then there are occasional repair and maintenance services that are requested by
individual stall owners, so we also have charges for those. Unlike the utility services, though, which are
recurring monthly charges, repairs and maintenance fees are only charged on a per service basis.

MJ: So that’s about it with regards charges? Basically stall rental and utility service fees?
CM: Not quite. The mall also has an inventory of various stall equipment that can be rented by the stall owners.
Examples of these are air-conditioning units, electric fans, display lights, television sets, audio equipment,
telephone units, and the like. We even have glass display cabinets in different sizes and designs, typically for
the use of island stalls. Separate equipment rental fees are charged to those stalls that avail of these
equipment. Damages to equipment, or in some cases, loss of the equipment, have corresponding charges
as well. And, before I forget, we also get a percentage share of each shop’s monthly gross earnings, which
we refer to as the Gross Monthly Sales Share, or GMSS. The GMSS varies from shop to shop, based on the
shop business. We require shops to submit to us reports of their gross sales, based on their sales receipts,
that serve as basis for the GMSS computation. For those shops which can afford it, we have accredited
several electronic point-of-sale systems that they can use and which have the capability to produce the
gross sales report, both for the convenience of producing those reports as well as to discourage cheating on
gross sales reporting. For booth type of stalls, which usually don’t issue receipts, we have a fixed GMSS fee
that we charge them.

MJ: That’s quite a variety of charges, huh?

CM: Indeed. And you can just imagine how many people we employ to keep tab of all of those. Currently I believe
we have close to ten people doing just that.

MJ: I think I get quite a picture. Are these other charges stipulated in the SRC as well?
CM: The GMSS is, and it is fixed for the entire contract duration. For the utility services and equipment, there are
two other documents we use, which we call the Utility Service Request Form, or USRF, and the Equipment
Utilization Form, or EUF. Basically, shops that would like to subscribe to the utility services we offer request
so using the USRF, while those that need the equipment we provide use the EUF. The typical case is that
they are charged on a monthly basis, but the charges are prorated in case their usage is only for shorter
periods. We have daily rates, for example, for rental of sound system equipment used in occasional shop
advertising campaigns, as well as monthly rates for rental of audio equipment used in providing piped-in
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 shop music. The utility services and equipment use can also be discontinued at any time, subject to proper
notification of our Utility and Equipment Services Department. Requests for occasional repairs and
maintenance have to be coursed through our Maintenance Department. I believe we have a separate
request form for that.

MJ: I see. So how do you bill the stall owners for all these charges?
CM: Each stall owner is assigned a billing cutoff date, which is the day of the month when stall occupancy started.
On this date, the stall owner is required to submit a report of their gross sales from the last cutoff date to the
current cutoff date. The monthly bill is then prepared and is received by the stall owner three days after the
cutoff date. We indicate in the monthly bill the breakdown of rental, utility, equipment, and sales percentage
charges, along with unpaid balances and surcharges, if any, from the previous monthly bill. The stall owner is
then given seven days from the receipt of the bill to settle the charges. The preparation of monthly bills is
the responsibility of our Billing Department.

MJ: How do stall owners pay their bills?

CM: Once a contract for a stall is signed, we open, in behalf of the stall owner, special deposit-only bank accounts
with our affiliate banks. We are currently affiliated with BPI, MetroBank, PNB, and Banco de Oro, and we’re
working out affiliations with other banks. For each shop, up to three separate bank accounts may be
opened, and it is via these accounts that the shop owners make separate payments for stall rentals, the
GMSS, and all the other charges. Stall owners make payments by depositing in the appropriate accounts the
necessary funds covering the charges indicated in their bills. We have previous arrangements with the bank
management that they provide the stall owners with a proof of deposit whenever the owners make deposits.
These proofs of deposit are then submitted by the shop owners to our Finance Department. In case of
check deposits, we require that the checks are cleared within the seven-day period after receipt of the bill.
Otherwise, or in other cases when deposits are not made soon enough, the shop owner will be considered
delinquent in their bill payments. Unfunded check deposits, by the way, are considered serious payment
offenses, subject to penalties indicated in the SRC.

MJ: You mentioned something about surcharges, and I assume those are applicable for late payments?
CM: Yes. By the way, we also require shop owners to make an initial deposit in their stall rental accounts
equivalent to a month’s rental when the contract is signed, and before occupancy of the stall. This initial
deposit can be credited for their first month’s rental payment.

MJ: How much do you charge in cases of delinquent payments?

CM: Typically, it’s ten percent of any unpaid balance, though that percentage can vary based on the terms stated
in the SRC. The surcharge is reflected and settled in the subsequent month’s bill, or, in case it is already the
last month of the contract period, the surcharge must then be settled before the contract can be deemed
terminated. Delinquent payments are also considered violations of contract terms, and they are stipulated
so in the SRC. Repeat offenders may be subjected to premature SRC termination. We do not issue notices
for delinquent accounts, by the way.

MJ: Can stall owners make advance payments? And if so, do they do so?
CM: Yes, they can. And yes, some of them do. At any rate, the accounts we open for them are deposit-only
accounts, so once they’ve made a deposit, they cannot recall the funds anymore. We usually transfer funds
from their accounts to our own accounts ten days after the bill issuance, or three days after the seven-day
payment period, and in case they have advance payments in the form of excess deposits, we only transfer
the amount reflected in their current bill, so whatever amount is left in their account is then carried over as
payments for the next billing period. On normal contract termination, any excess account deposits are
refunded to the stall owner when the account is subsequently closed.

MJ: Are there cases when you overcharge stall owners?

CM: Very rare, but it can happen. In such cases, we reflect the adjustments in their next monthly bill, and any
overpayments for the previous bill will then be credited as payments for the next bill.

MJ: Okay, I think that more or less suffices for an overview of SM’s operations. Do you have any specific
requirements in mind regarding the functionality of the system you are asking us to develop for you?
CM: Well, at the moment, it’s quite fuzzy for me. I was hoping you can give us some proposals and ideas on what
you can provide us, in support of our operations.

MJ: Well, can we focus initially on your billing operations?

CM: Sure. That’s really where all the complexities of our day-to-day activities are concentrated. Right now we
prepare bills by hand, and our Billing Department personnel usually work overtime just so we can produce
the bills on time. I guess we’re in dire need of something electronic that can automate our billing operations.

MJ: Okay. We will be doing an initial analysis of your operations and we’ll present you with a draft design by next
week then.
CM: Okay. We’ll look forward to that.

MJ: One last question. How long do you want to be able to keep track of your billing information?
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CM: Well, we prepare our financial reports at each year’s end, though it would be good if we can access our billing
information for previous years. If we can keep them forever, that’ll be swell. If not, then maybe at least three
years, considering that that’s the longest contract period that we allow. Or if its possible to sort of have one
system concerned with current contracts and another dealing with those contracts that have already been
terminated, that’ll probably do as well.

MJ: Okay. We’ll see what we can do about that.

CM: Okay. We’ll see you next week then.

*** End of Transcript ***