There’s an estimated 700,000 sari-sari stores throughout the Philippines. That’s roughly 1 sari-sari store for every 130 Filipinos. Along a 50-meter stretch of road in a squatter area somewhere in Malabon, there are around 45 sari-sari stores. I’m interested to know if there’s a study correlating the number of sari-sari stores with the economic condition of the surrounding area – the more sari-sari stores in an area, the poorer the population.

 

The rules of the game almost ensure that the sari-sari store remains small. Its market – the immediate neighborhood – is generally static. The population within the vicinity may grow, but when a sari-sari store in a neighborhood becomes successful, another pops up because of the relative ease in setting it up. The new store eats into the profits of the rest, effectively negating any increase in the market size. Bigger purchases are made somewhere else, perhaps in a supermarket or a “bagsakan”, where the sari-sari store themselves buy their products. The “bagsakan” is the middleman, where suppliers deliver the products in bulk – with the standard discount and the bulk discount.

Also, prices in a sari-sari store will remain to be expensive on a per-piece basis. It doesn’t operate in volume, unlike SM or Walmart that could generate substantial profits even with a margin of mere cents. This per-piece or “tingi’ purchasing behavior, even if actually more expensive, has become accepted, so much so that it gave rise to the “sachet” marketing strategy of big companies.

It’s hard to consider sari-sari stores as a hotspot of innovation, which is “the effort to create purposeful, focused change in an enterprise’s economic or social potential” Some economists/authors consider innovators, also called entrepreneurs, as the engine of economic growth. Maybe it would help to create a cooperative among sari-sari store owners. With a greater number and volume, the cooperative could deal directly with manufacturers as a “bagsakan”, eliminating middlemen and getting the discounts, while at the same time enjoying tax perks and other incentives. How to harmonize the individual interests, taking into consideration the crab mentality amongst us, is another matter.

Maybe we could consider the Hapinoy concept as an innovation. Hapinoy is envisioned to be the Philippines’ first and largest sari-sari store chain. The program provides a package of benefits (microfinancing, additional income through best price and new businesses) aimed at empowering microentrepreneurs and helping them grow their business. It’s important to instill business/fiscal discipline and create an entrepreneurial attitude among existing sari-sari store owners. With those attitudes in place, it won’t be as hard to expand into other businesses.

Even if the sari-sari store will eventually be wiped out, there’s still an opportunity with projects such as the Hapinoy. If we assume that a sari-sari store is “managed” by at least one person, then that would translate to 700,000 self-employed business persons. That base figure is a great way to start the entrepreneurial revolution.

Despite the inefficiencies of a sari-sari store, it won’t vanish in the near future. For one, it’s easy to start a sari-sari store. How to start? Just cut a window (facing the street) through the wall of your house, shop for the most common grocery needs from the cheapest source, add around 20% to the purchase price, then divide the amount using the number of pieces in that package. The State also deemed it fit to protect sari-sari stores – while retail trade is liberalized under the Retail Trade Liberalization Act (R.A. 8762), qualified foreign retailers still can't sell using sari-sari stores.

More importantly, the sari-sari store is merely reflective of the subsistence living of many Filipinos. You earn just enough to feed you through the day, so you buy only what you need for the day. The main reason is not convenience or frugality, but the lack of money to buy an entire package. The sari-sari store will remain for so long as the underlying economic reality continues.