Every country has its own convenience store. The US has “7-Eleven”; Japan has “Family Mart”, “Lawson” and “Ministop” while the Netherlands has “SPAR Express”. The Philippines has “Treats” and “Select” in every Petron and Shell gas station respectively and “All Day” from the Villar group of companies. But perhaps no retail unit is more identified with the Philippines than the Sari-Sari store. It is a profitable business if you know how to start a Sari-Sari store with small capital in the Philippines.
The Sari-Sari store is your local neighborhood convenience store. These are informal businesses that are set up just about anywhere there is good foot traffic. People who want to have a business from their homes or one that does not need much capital will usually opt for a Sari-Sari store.
It is a simple operation. You stock up your store with popularly bought products and merchandise that should be priced more attractively than the larger commercial retail stores. Despite the proliferation of the foreign brands of convenience stores, Filipinos still flock to the Sari-Sari store.
We’ve heard the stories of Sari-Sari store owners who have been able to send their children to school because of this humble and unassuming business. You can make real money with a Sari-Sari store business if you run it professionally. It is possible to start a Sari-Sari store with small capital in the Philippines but be prepared to put in a lot of work and dedication!
Here are the steps on how to start a Sari-Sari store with small capital in the Philippines:
1. What’s in a Name?
Yes, seriously what’s in a name especially for a Sari-Sari store? Naming a Sari-Sari store should be a no-brainer. The formula has withstood the test of time:
Your First Name + “Sari-Sari Store” = Sari-Sari Store Name
If your first name is “Juan”, can you imagine how many “Juan’s Sari-Sari Store” owners there are in the Philippines?
Even if the Sari-Sari store has remained largely unchanged over the last decade, what’s wrong with a little play on names?
Despite being a low capital business, it is still subject to the same principles as every venture. You still need to build your brand and identity, and this begins with the name of your establishment.
Come up with a name that is:
- Easy to remember
Sari-Sari stores are known for convenience and affordability. Look for descriptors in the vernacular that will allude to those qualities.
Related: Top 10 Sari-Sari Store Business Tips in the Philippines
2. Register Your Business.
The biggest oversight Sari-Sari store owners make is not to register their business. They think that because these are recognized as informal businesses, there is no need for it to be registered.
Not only will there be a “need” but there will be great value and future benefits for your Sari-Sari store if you register it as a legal business entity:
- You can negotiate better prices and terms with suppliers.
- You can open a business account with a bank, have a checking account, start a credit rating and manage your earnings better.
- You get tax benefits.
You can register a Sari-Sari store as a sole proprietorship or as a partnership. The agency that attends to this is the Department of Trade and Industry or DTI. Business registration can be done online. Once you register your business with the DTI, your certification will be good for five years.
Remember that if you want your business to prosper, you must manage it like a professional.
3. Find a Great Location.
It is not uncommon for Sari-Sari store owners to set up the business in their homes. If their home has good street accessibility and visibility, all they need to do is knock down a wall. There are many advantages to this:
- Saves up on rent.
- No need to buy kitchen equipment if you plan to sell meals as well.
- Stay closer to the family.
Improvements may cost you 10,000 Pesos depending on the extent of work to be done. The most obvious risk, however, is that your house becomes more open, and you may compromise security.
The next option would be to find a busy sidewalk or any place that has a high volume of foot traffic. Check with the local government if there are zoning restrictions that you should be aware of when looking for potential locations.
The cost of setting up in a location outside your home will be more expensive and will incur a rental expense.
4. Come Up with a Study.
Just because the Sari-Sari store is an accepted unit of retail in the Philippines does not mean you should not give the business more thought and scrutiny.
Have you seen the vendors of Japanese corn that line up along Katipunan Avenue in Quezon City? The vendors are literally just a few feet of each other. All the merchandise looked exactly alike and packaged the same way. I always think, “How do these vendors make money?”
Before you set up a Sari-Sari store, do a quick survey of the area. Find out the following:
- Number of Sari-Sari stores within a 5km radius
- Survey of the most purchased store items
- Average pricing per item
- Types of goods and products sold
- Operating hours
- Where the foot traffic is coming from
The information will help you come up with better ideas for your Sari-Sari store.
5. Differentiate Your Store.
Who says that a Sari-Sari store only needs to sell merchandise? Here are some of the unique versions I’ve seen so far:
- Sari-Sari store with carinderia
- Sari-Sari store with Internet shop
- Sari-Sari store with water refilling shop
- Sari-Sari store with Coin Laundry
- Sari-Sari store with videoke
Come up with a novel idea for your Sari-Sari store and give your customers more reason to visit your establishment over others.
Again, if you have a small capital, most of these concepts would be out of the question. Your options would be to join forces with an existing business, rent at a location that has any of these facilities or to get a business partner.
6. Find Suppliers.
As a Sari-Sari store owner, you have to make sure your stocks are always at par level, presented in good quality and priced affordably. One of the most efficient ways to go about this is by entering into a supply contract.
If you have a supply contract, you can get discounts on items, and it saves you time from having to buy these daily and use up cash. Soft drinks, for example, are best purchased directly from the manufacturers. You don’t have to pay cash right away if you can get terms of 15 to 30 days.
Not only will they deliver as scheduled but you can accumulate enough points to benefit from their MSF or Marketing Support Fund. You can get free supplies which you can package with slow moving items and get them flying off the shelves.
Keep in mind that these manufacturers give more importance to registered businesses.
7. Hire Right Fit People.
If you want a well-managed store, you should hire someone you can trust. There will be days where you will get sick, or you may have to attend an event or a function. Your store has to be able to function without you.
You should make sure you can entrust your business to someone who will implement the rules. Pilferage, stolen sales, wasted products are among the nagging problems in a Sari-Sari store business. This is why many owners do not want a rest day.
Take the time to interview candidates and pick out the one whom you feel you can work with on a daily basis.
8. Create a System.
A system is made up of processes and frameworks. Every business needs a system. In a Sari-Sari store, your system should cover the following areas:
- Inventory – In a Sari-Sari store, you have to rotate your items properly to ensure quality. You must follow the principle of FiFo or “First In First Out”.
- Cash Management – You should not keep all of your sales inside the store. This is the advantage of having a bank account. Just keep enough as change fund and for the following day’s purchases.
- Accounting – Keep track of your cash. You should know how you are spending every centavo earned by the business.
- Cleanliness – Always keep the store clean. You may not see it, but rat urine can contaminate canned goods. Keep everything properly stored and cleaned.
9. Manage Your Inventory.
We touched on this in the previous number, but Inventory management should always merit further discussion.
As a Sari-Sari store owner, you should not run out of inventory. You will easily lose customers this way. In fact, when you start your business, your small capital would be allocated for initial inventory and working capital for at least three months.
This is also why you should make a market study. By having an idea of what items are in demand, you would have an idea on what to stock up on and the par stock levels. Ideally, you should have at least three days worth of stock on hand.
Usually first time Sari-Sari store owners stock up on 10,000 to 15,000 Pesos worth of merchandise. These mostly consist of the following:
- Canned goods
- Instant coffee
- Instant noodles
These are the fast moving items that do not expire or have a long shelf life. The rest of the items can be purchased whenever you are down to 1-2 days stocks.
10. No to Credit!
The best thing about the Sari-Sari store business is that it is a cash generating business. No one goes to a Sari-Sari store and expects you to honor his or her credit card for instant coffee and a kilo of Dinorado rice. Customers can only buy merchandise with cash.
The problem with many Sari-Sari store owners is they condone abusive customer behavior such as:
- Credit terms – In Filipino, it is referred to as “Pa-Lista”, which means to buy now and pay later. The Sari-Sari store owner will have the customer sign on a logbook on what he or she has taken out of credit. This arrangement creates a problem on your cash flow. What if the customer pays their credit after 30 days and your soft drink supplier already increased prices by 5 Pesos?
- Family System – Another annoying behavior is allowing family members to “ransack” the Sari-Sari store as if it was a wide open piggy bank or an extension of the kitchen. This is your business. You paid for it with your blood, sweat, and tears. There should be no exceptions to your rules. Anyone who wants to buy anything from the store should pay for it in cash.
If you manage your cash efficiently, you will be able to sustain operations with internally generated capital and potentially build up savings.
Start Your Sari-Sari Store in the Philippines with Small Capital
All told, you could probably set up a Sari-Sari store in the Philippines with a capital of 25,000 to 50,000 Pesos. This amount covers:
- Business registration at DTI
- Opening account balance at the bank
- Store improvements
- Initial Inventory
- Working Capital for three months
So, yes! You can start a Sari-Sari store with small capital in the Philippines. The real challenge lies in managing it and allowing it to grow.
Who knows? Maybe you can create your concept and franchise internationally. “Sari-Sari” sounds like a good name.