Fatal impact?: The Philippine convenience store epidemic, Part II
There is no doubt the convenience store epidemic is underway and the key players are all now in rapid expansion mode. The success of a convenience store network is predominantly based around opening enough outlets to achieve critical mass in sourcing and supply chain logistics.
Locations, locations and more locations are fundamental in delivering the “convenience” aspect of this retail model.
For those who read my last article on the convenience store growth in the Philippines you may recall my closing comment was… “Sounds too good to be true… maybe it is! There is another side to this story that deserves careful consideration as the social and economic ramifications are potentially extreme and could impact upon millions of everyday hardworking Filipinos”.
What exactly is a ‘convenience store’? The following definition is based on selected extracts from Wikipedia:
A convenience store is a small retail business that stocks a range of everyday items such as groceries, snack foods, candy, toiletries, soft drinks, tobacco products and services. It may be located alongside a busy road, in an urban area, or near a transport hub. Convenience stores can have long shopping hours and usually charge higher prices than conventional grocery stores or supermarkets however convenience stores make up for this by having longer opening hours, serving more locations, and having shorter cashier lines.
So the definition does describe all of the modern day convenience stores – but, the same description sounds remarkably similar to a much longer serving traditional local version, the sari-sari store.
Let’s compare this definition with Wikipedia’s definition of the sari-sari store:
A sari-sari store, or neighborhood variety store, is a convenience store found in the Philippines. Such stores form an important economic and social position in a Filipino community. It is present in almost all neighborhoods, sometimes even on every street. Most sari-sari stores are family-run shops and are operated from the owner’s house. Candies in recycled jars, canned goods and cigarettes are often displayed while cooking oil, salt and sugar are stored at the back of the shop. They also distribute prepaid mobile phone credits, (services).
From both definitions, it is obvious the sari-sari store is the traditional form of the modern convenience store. They both use location for convenience, they both cater for day-to-day basic needs, (products and services) and they both have a narrow product offer sold over extended hours.
If the modern convenience store and the traditional sari-sari provide the same retail service, what will happen as the modern chains run out of sites in the larger cities and then embark on location growth by expanding into the provinces?
It has been predicted that the modern day convenience store will, over time, climb to 50,000 sites and that would make this the most populous of all the modern day retail formats. Impressive as it sounds it is actually insignificant when compared to the number of small sari-sari stores which, by many estimates, total 800,000-plus nationwide (the population could actually be greater than 1 million).
Many sari-sari stores exist in every village. They operate without the fixed costs, structure and operating expense of the modern retailer, and they play a valuable part in Filipino culture. More than just a basic retail service, they are a meeting place with significant social value to the community. Perhaps the most critical consideration here is the fact that the majority of sari-sari store owners rely upon income generated from their sari-sari store for family survival. Given the total number of sari-sari stores it is easy to see they contribute significantly to the overall GDP of the Philippines.
The sari-sari owner also drives substantial related local business as they purchase the goods they sell from local markets, existing retail outlets, (just stand in any local supermarket and see the trolleys laden with strips of sachets which are clearly headed to stock the sari-sari store), and wholesalers.
Once modern retail convenience stores ‘own’ the main cities, they will inevitably expand into the sari-sari heartland – the local village. Is it possible the further the modern convenience store expands, the greater the negative impact will be on the livelihoods of those dependent on the sari-sari for survival?
Maybe the big players will see the merits in teaming up with traditional sari-sari operators so as to avoid the possible extinction of 1 million plus traditional traders. Maybe the big players could develop a mobile, branded mini-retail unit that could be supplied to and operated by the traditional store owner resulting in a “win-win” outcome: the international retail brand secures market penetration whilst the traditional operator can survive and support the family.
In Japan in 2011, FamilyMart launched a mobile convenience store concept for use in disaster areas. The mobile store holds approximately 300 different items including lunchboxes, cup noodles, drinks, sweets and many more daily essentials. Could this be a starting point for developing a sari-sari convenience model?
Of course there are many obstacles that would have to be overcome, including the development of retail skills and business disciplines, accounting processes and brand responsibilities. However, in return the local operator contributes intimate local market knowledge and by being a valuable cornerstone of the community, give the convenience brand credibility.
What a wonderful outcome it would be if the combination of “big brand” power, (experience, capital and organization) and local “family/village” skills, (local knowledge and intimate social interaction), produced the best of both worlds forming a unique partnership between the traditional and the modern retail elements?
In reality modern day retail expansion will continue and there is much to merit this as providing the best of retail in the Philippines. But, it would also be worth applauding if retail progress could be achieved without the destruction of the traditional sari-sari store.
Inside Retail Philippines columnist Darrell Wisbey has 40 years retail experience, living and working in Australia and Asia. Darrell delivers seminars and workshops for Philippine Retailers Association. Contact Darrell here.