News Analysis Trade

A convenient truth

Entrepreneurship _ 2017 Global Entrepreneurship Index

In the Philippines, sari sari stores (photo) – small convenience retail outlets – are endemic. Across the archipelago there’s anywhere between 800,000 and 1 million of them; possibly more. They spring up like mushrooms in every residential neighbourhood and if they were all amalgamated they’d be the biggest groceries retailer in the country. And by a wide margin.

Five years ago, according to market-research provider, Euromonitor, 75% of all groceries sold in the Philippines was from sari sari stores. Total annual sales from these outlets combined is in the order of PHP1 trillion. In other words, sari sari stores are huge business.

Furthermore, this sector has a lock on the country’s entire convenience-store market. Last year, in a local press interview, Jose Victor Paterno, president and chief executive of publicly listed Philippine Seven Corp – operator of a nationwide network of 7-Eleven convenience stores – said this: “A long time ago we tried competing with the sari-sari store, like lowering prices. We realised wala kaming laban [we cannot compete]. They’re too convenient. How can you beat that level of convenience?”

What these small and micro enterprises also represent, however, is a specific human resource which, if properly galvanised, could be a major contributor to economic growth in the Philippines. For what every single sari sari store owner is, is an entrepreneur. These are all people who identified a niche-market need and went out to fulfill it. That’s the classic motivation for entrepreneurs and those of the Filipino kind staked their claim on the convenience-store market in classic entrepreneurial fashion.

The 2017 Global Entrepreneurship Index (GEI) – produced by the Global Entrepreneurship and Development Institute – measures the quality and dynamics of entrepreneurship in 137 countries world wide. Here, we show in order how the Philippines ranks on that index among the 10 member states of the Association of Southeast Asian Nations (Asean).

The results are: Singapore, 24th; Brunei, 53rd; Malaysia, 54th; Thailand, 65th; Philippines, 76th; Vietnam, 87th; Indonesia, 90th; Laos, 105th; Cambodia, 114th; Myanmar, 120th.

The Philippines, then, comes fifth in Asean which is lower than we expected it to be. Having watched the Philippines for more than three decades, we believe that Filipino entrepreneurs are among the most innovative and industrious of any to be found anywhere. Actually, they’ve had to be; governments – certainly in the past – did precious little to encourage them and support their efforts.

There are, however, areas where they need to improve – and we’ll be looking at those in this latest infographics series. That said, the one thing we have absolutely no concerns about is that the entrepreneurial spirit in the Philippines is extremely strong.

Let’s return to the sari sari store owners. They carved out their sector with their own hands; individually, they work long hours filling their stores with merchandise they know they can sell. Sari sari may be the Tagalog for ‘variety’, but the inventories of these stores are a snapshot of everyday products – salt, rice, sugar, vinegar; cooking oil, potato chips, peanuts, instant noodles, candies; soft drinks, beer, gin, sachets of coffee, cigarettes; shampoo, inexpensive cosmetics; batteries, prepaid phone cards, floor wax, detergents.

But here’s why these micro-businesses work. Overheads are kept to a bare minimum – the stores operate out of their owners’ homes; generally, retail staff comprises the owner and members of the owner’s family. Capital requirements, therefore, exclude wages and rental payments for premises.

Product ranges are tightly controlled, as are stock inventories – sari sari store owners rarely speculate with products outside their tried-and-tested lines. These are purely cash businesses; daily/weekly cash flow is what sustains them. Store income provides the operating capital – after living costs are deducted, it buys the merchandise for retailing.

They are then, in every sense entrepreneurial enterprises and stand as a true testament to Filipino entrepreneurship. And that’s a resource that needs to be fully embraced. According to the Global Entrepreneurship and Development Institute, if conditions in the Philippines were improved for entrepreneurs by just 10%, the Philippine economy would benefit by as much as PHP241 billion.

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