If there is a retail unit that is highly identified with the Philippines, it would be the sari-sari store. They are found almost everywhere in the Philippines—neighborhood, street corners, and even in a few gated subdivisions. The sari-sari store is the personification of the Philippines’ small business industry; it is the original Filipino convenience store.
There are several reasons why Filipinos get into the sari-sari store business:
- Low start-up capital. 93% of sari-sari store owners set up shop outside their homes. They spend on doing minor renovation work to create access to storage facilities inside the house. The initial inventory for a week’s worth of goods may start for as low as Php 10,000.
- Cash business. The sari-sari store is a straight cash payment business. There are no credit or debit card payments, and checks are not accepted. It generates cash sales every day.
- Convenient. This business is perfect for a “lola” or for stay-at-home parents who watch over their children.
- Low-risk approach to retail. People who plan to get into the retail business can use the sari-sari store as a low-risk approach to gain experience.
- Accepted retail concept. It does not need to be heavily marketed and promoted because this type of store is an accepted concept in the Philippines.
A sari-sari store can be a good source of income if managed properly. On average, a sari-sari store can average a net profit margin of 20%. We’ve heard stories of families who were able to send their children to college with the earnings from a sari-sari store business.
Unfortunately, many sari-sari stores close because of poor management. When your business is located in a community where familiar names and faces make up the majority of your market, the sari-sari store becomes victim to use and abuse.
Here are top 10 valuable tips that you should use to manage a successful sari-sari store business in the Philippines.
Top 10 Sari-Sari Store Business Tips in the Philippines
1. Register the store as a legit business
Many sari-sari stores are informal businesses. They are not registered as a formal organization, and they do not pay taxes. Thus, economists have long regarded sari-sari stores as benchmarks of the informal sector.
However, registering a sari-sari store as a formal organization is a good idea because being a legitimate business has benefits.
- Suppliers can give you low pricing.
- Suppliers can extend your credit.
- Diversifying your business can be easy because many suppliers would prefer to deal with legit businesses.
- Service providers can give you low pricing.
- Government agencies can provide support in funding, marketing, and promoting their services.
You can register your sari-sari store business with the Department of Trade and Industry or DTI.
Related: How to Start a Small Business at Home in the Philippines
2. Respect the store as a source of income
One of the biggest problems that affect the profitability of a sari-sari store business lies to the fact that the store is established close to home.
Store owners may even actually live in the house where the sari- sari store business is located!
For instance, many family members and friends often view the sari-sari store as a refrigerator or personal stock room where they can help themselves to what they want. The poor sari-sari store proprietor, who is held back by the traditional beliefs on close family ties, allows himself to be victimized and abused over and over again.
Over time, his inventory has diminished because of pilferage and not because of sales. He has to draw from savings to keep the business going. Unmitigated, the vicious cycle continues until the store shutters for good.
The store owner should make it clear to everyone in the community that the sari-sari store is a business in which he has invested. It is a source of livelihood that should be respected.
3. No to credit!
Another problem that affects the profitability of sari-sari store business is credit. Filipinos are generous people by nature. We are not comfortable turning away family and friends who need basic commodities but cannot afford to pay at the moment.
The naïve store owner decides to compromise his cash flow by extending credit to customers, especially the regular ones. The store owner creates a “list” to note down the details of the item that was purchased on credit.
Unfortunately, stocks move fast in a sari-sari store business. If you don’t have a supplier arrangement, you have to pay cash for your stocks. By extending credit, the store owner has negated the cash-generating ability of the sari- sari store. Eventually, he draws from his pockets to pay for his stocks.
Secondly, customers with credit terms hardly pay on time. They simply patronize another sari-sari store until they have the money to pay back the owner of the first store. In some cases, credit ends up as unearned revenues.
Do not extend credit when you run a sari-sari store business! Doing so is not part of customer service! I’ve interviewed some store owners saying that a little amount is not a problem. However in business, a little can go a long way. When the information that you allow credit terms gets out, the flood gates will open.
Family and friends who expect credit because of close ties abuse the relationship. They don’t respect you any more than they respect your business. If they insist, go back to tip #2.
4. Increase added value
Offer your customers various cost-saving options. The first thing you need to do is to list down the items with the highest profit margins and use these to sell your slow moving items.
For example, if instant coffee has the highest profit margin and evaporated milk is the slowest moving item, package these items together every payday weekend.
You can also do a customer loyalty program. For example, for every Php 1,000 total purchase, a customer can get free cell phone load worth Php 30. This represents only a 3% discount, but for the customer it creates great value and encourages increased spending.
5. Maintain records
If you want to know if your business is making money, you should always maintain proper records. You don’t have to be an accountant to track your business expenses and income. Take time to update records daily.
Maintaining records also helps you organize and manage the business properly. If the city government and the tax collection agent pay you a visit, you should have your records available immediately.
6. Buy from wholesalers
Many sari-sari store owners buy their stocks from retailers. Thus, their profitability becomes limited because not only retailers add on their margins to the merchandise but you also end up paying for the packaging costs.
A good option is to buy from wholesalers who are authorized as distributors by the manufacturers. The markup is low, and you can use your own packaging.
If your volume of purchases is not enough to be accommodated by a wholesaler, opt for generic over branded items from the retailers and use your own packaging when selling in your store.
7. Offer variety
The standard inventory of items sold in a sari-sari store is as follows:
- Canned goods
- Instant coffee
- Powdered drinks
- Instant sauces
- Cooking oil
- Instant noodles
Experiment with various items that are not commonly found in a typical sari-sari store. Here are a few ideas:
- Mosquito repellant during summer
- School items by May
- Handy umbrellas during rainy season
- Diapers for infants and adults
Survey the competition located within 5 kilometers from your store. Do an inventory of what they have and offer in your store what they don’t have.
8. Be different
You don’t have to follow the traditional business model of a sari-sari store. Develop ideas that will make you different and stand out from the rest. Here are a few suggestions:
- Set up a small area for Internet use.
- Open up an eatery beside the store.
- Offer laundry services.
- Offer newspapers and magazines.
In accordance to tip #1, a registered business acquires many advantages. You can avail of a lease-to-own arrangement plan from a computer retailer for your PC in case you want to have a small area for Internet use. The payment can be generated internally from sales.
If you have the capital and if your space merits it, you may even put up a lotto station!
9. Observe quality control
If you want to maintain customer loyalty, always make sure that the products you sell are of good quality. Here are some tips:
- Never expose instant noodles and chips under direct sunlight to preserve crispiness.
- Keep rice stored in air-tight containers and elevated from the ground.
- Line the floor area bordering your shelving tiers with cockroach chalk.
- Check the quality of your vegetables and discard spoiled ones.
- Clean bottled drinks thoroughly before putting them inside the refrigerator.
- Avoid using thumb tacks or staplers to display items in sachet form.
- Practice first in first out or FIFO method.
- Keep the store clean at all times. Get rid of food debris and garbage from the vicinity of the store.
10. Never run out of stock!
One of the worst things that can happen in a retail business is to run out of stock. In retail, running out of stock is a mortal sin; it is unforgivable. Customers will remember you for it.
Therefore, performing a daily inventory of your store items is important. Keep track of fast-moving items and make sure that these are replenished when you are at 40% of your par stock levels.
Sari-Sari Store: Our jeepney but without its mechanical flaws!
A sari-sari store can become a profitable business but only if you manage it as a professionally run retail establishment.
Further reading: How to Start a Sari-Sari Store with Small Capital in the Philippines
It has the standard features of a convenience store business model with the absence of credit extension facilities as the biggest differentiator. The possibilities of taking the humble sari-sari store to another level are limited only by your creativity and imagination.
An innovative concept was the “Rolling Store” model introduced by former President Joseph E. Estrada in 1999. Inaugurated as “ERAP stores,” these stores were initially designed for the purpose of selling rice. Since then, entrepreneurs have adapted this concept for the sari-sari store and food retail.
Despite the arrival of foreign convenience store franchises, the sari- sari store will continue to thrive because it is part of our cultural DNA. The sari-sari store is like our jeepney but without its mechanical flaws!