Island Souvenir: From Cebu to the World

A quest that started in Cebu 11 years ago continues to this day...abroad.

By Veronica C. Silva

BusinessWorld, 15 December 2003

While backpacking in Europe back in 1992, fresh college graduate Jonathan Jay P. Aldeguer noted the absence of a recognizable brand for the souvenir collection hobby anywhere he went. "My backpacking travel in Europe...and the Philippines confirmed my observation that the souvenir industry, not only in the Philippines but even internationally, is perceived as a cottage-type industry. It hasn’t evolved into anything," he said.

It was this void that drove Mr. Aldeguer, a thirty-something young entrepreneur, to conceptualize a one-stop store for tourists’ souvenir needs: from T-shirts to mugs and other travel items.

At age 21, with an initial capitalization of PhP 200,000 that he got from his earnings in college and from his parents, Island Souvenirs was established in 1992. With a PhP 1500 bamboo cart, Aldeguer began selling shirts at the White Gold department store in Cebu.

Applying a dash of tropical taste to this initial idea, Mr. Aldeguer now has shops all over the Philippines and in other tropical-inspired tourist spots worldwide.

"What’s driving me to even reach further is the fact that the souvenir industry is a multimillion-dollar industry. But there is no one brand that even exists," he noted.

In search of a brand, Mr. Aldeguer finally settled on "Islands Souvenirs," a brand that started in the Philippines which aims to offer quality souvenirs to both domestic and foreign tourists.

"To a certain extent, people want to see something familiar...What we’re trying to do is develop a souvenir brand that projects a unique characteristic about the place," said Mr. Aldeguer.

The brand that aims to make it big in the multimillion-dollar business started in Cebu, located in Central Visayas and dubbed as the Queen City of the South. From Cebu, the company expanded all over the Philippines, focusing on key tourists destinations, including new ones like Siargao in northern Mindanao.

After putting up more than 100 stores in the Philippines, Islands Souvenirs is setting its sights on other tropical locations outside the country.

The company’s strategy to expand outside the Philippines is through franchising and joint ventures. Franchising was admittedly an afterthought for Mr. Aldeguer, although international expansion has always been the goal.

"The goal is to go global; that’s what we really wanted to do," he said. "I gave myself 10 years to stabilize our local operations and set up our distribution in the Philippines."

An initial attempt to go abroad in 1996 flopped. But it convinced him that franchising is the right strategy. He said he thought it was feasible for the company to expand abroad on its own because the company was enjoying brisk sales during the first few years of operations.

"But we wanted local participation," Mr. Aldeguer said. "It’s always nice to inject the local characteristic.

"When we opened, there were really two things I wanted to consciously integrate into the concept: the tropical concept and a wide array of items," he added.

The company is focusing on other countries with a tropical setting similar to the Philippines. The company’s first successful attempt was in 1999 in Okinawa, one of the few islands in Japan with a tropical climate. The company now has three outlets in the Okinawa international airport.

Two more franchise outlets -- a store and a kiosk -- were opened in 2001 in Singapore at the Suntec Convention.

The company offers boutiques or stand-alone stores, kiosks and carts at varying franchise fees, depending on the location. The company does not charge for royalty fees, but instead makes money out of inventory.

All outlets in Japan and Singapore are franchises. To be sure, Islands Souvenirs also has joint ventures elsewhere abroad, but they carry the same tropical theme.

In 1999, Mr. Aldeguer teamed up with another Filipino entrepreneur to open an outlet in San Francisco, USA at the tourist spot, the Fisherman’s Wharf. There, the Islands Souvenirs brand was re-branded as "I love San Francisco," but with the same tropical theme and quality for which the Philippine brand has been known.

"Where I feel I have an understanding of the market, like the US, plus there seems to be a very strong potential, I would like more participation than just a franchise," Mr. Aldeguer said. "It [the outlet] still goes through the whole franchise setup, but I have a participation in the franchisee like a joint venture."

Due to the success of the San Francisco outlet, Islands Souvenirs is opening another joint venture company in the same area by next year.

The intention is to open as many outlets as possible worldwide. "There is a conscious effort to tap tropical-oriented and -inspired destinations so that we can carry out the Islands Souvenirs look," said Mr. Aldeguer. "Within the next couple of months, we’re looking at Guam and we’ve initiated talks already...Australia is also imminent."

The franchising model is expected to overtake the joint venture model as the company proceeds to expand. "Management-wise, it would be better to go with local partners," said Mr. Aldeguer.

To add muscle to his expansion plans, the young entrepreneur said that one of his immediate plans is to set up an offshore company either in Hong Kong or in Singapore to take care of distribution and marketing for the international outlets.

To be sure, going international has not been a walk in the park. Mr. Aldeguer noted. For instance, because the souvenir industry hinges on travel and tourism, sales of Island Souvenirs outlets abroad were affected by the severe acute respiratory syndrome which hit the region early this year.

Today, the company’s quest to promote a global brand that is synonymous to good quality continues.

"We’re glad to say that we showed how a cottage industry-type of business has a potential to be a worldwide business," Mr. Aldeguer said.

Due to his continuous success on the Islands Souvenir chains, Jay Aldeguer was awarded as one of the Ten Outstanding Young Men (TOYM) award for entrepreneurship at age 27—the youngest so far in the TOYM roster. Island Souvenirs has also been named “Outstanding Filipino Retailer” by the Philippine Retailers Association and the Department of Trade and Industry several times that Aldeguer was actually inducted into their Hall of Fame in 2003.