The pervasiveness of the neighborhood sari-sari store and its retail technique in low-income residential communities in the Philippines remains an unexplained neoclassical puzzle. How can such micro-enterprises continue to operate despite shrinking market shares from excess competition? What explains the relativity of the traditional-trade stores and its “tingi” system to Philippine culture? Sari-sari store is a small phenomenon of the vast Philippine cultural and economic landscape and one of the most legendary and well known symbols of this amazing archipelago in Southeast Asia. It can be found throughout every city, each neighborhood, at almost every corner of any street, in residential areas and even in the poorest squatter communities. It is the oldest and smallest kind of store in the country. Thus, Sari-Sari store and its retail technique known as “tingi” or sachet system play a unique role in Philippine culture and a common essentiality of everyday life for the Filipino people.
Retailing refers to the sale of merchandise from a fixed location, whether it is a physical location as in a down-town dress boutique or virtual location as in an online computer store. Retailer is the term used to mean those businesses involved in retailing and is often called shop or store. Establishments that distribute services or public utilities to a large population are also called a retailer. Retailing is considered a crucial part of the overall distribution strategy of manufacturing marketers. Retailers buy large quantities of inventory from manufacturers, suppliers, importers, or wholesalers and then resell inventory in smaller quantities to end-users. Hence, they are at the end of the supply chain. Shopping, or the buying of products or services, is a term often associated with retailing. Thus, buyers are also called shoppers.
Retailing is commonly categorized by the kind of goods. Food products are on top of the list. This includes all form of foods whether it is fresh or processed items. Second is the hard or durable goods also known as hard-line retail. It consists of all sorts of appliances, electronics, furniture, sporting goods, etc. These are the goods that do not quickly wear out and provide utility over time. Soft goods which comprise clothing, apparel, and other fabrics are the last category. These are the products that are consumed after one use or have a limited period (typically under three years) in which you may use them.2
There are several types of retail outlets. Department stores are very large stores offering a huge assortment of soft and hard goods; often bear a resemblance to a collection of specialty stores. A retailer of such store carries variety of categories and has broad assortment at average price. They offer considerable customer service. Discount stores tend to offer a wide array of products and services, but they compete mainly on price offers extensive assortment of merchandise at affordable and cut-rate prices. Normally retailers sell less fashion-oriented brands. Warehouse stores offer low-cost, often high-quantity goods piled on pallets or steel shelves. Variety stores – these offer extremely low-cost goods, with limited selection. Mom and pop is a retail outlet that is owned and operated by individuals. The range of products are very selective and few in numbers. These stores are seen in local community often are family-run businesses. The square feet area of the store depends on the store holder. Specialty stores give attention to a particular category and provide high level of service to the customers. A pet store that specializes in selling dog food would be regarded as a specialty store. However, branded stores also come under this format. General store is a rural store that supplies the main needs for the local community. Convenience stores are essentially found in residential areas. They provide limited amount of merchandise at more than average prices with a speedy checkout. This store is ideal for emergency and immediate purchases as it often works with extended hours. Hypermarkets provide variety and huge volumes of exclusive merchandise at low margins. The operating cost is comparatively less than other retail formats.
Supermarkets are self-service stores consisting mainly of grocery and limited products on non-food items. Malls have a range of retail shops at a single outlet. They endow with products, food and entertainment under a roof. E-tailers wherein customer can shop and order through internet and the merchandise are dropped at the customer’s doorstep. Here the retailers use drop shipping technique. They accept the payment for the product but the customer receives the product directly from the manufacturer or a wholesaler. This format is ideal for customers who do not want to travel to retail stores and are interested in home shopping. Vending Machines are automated piece of equipment wherein customers can drop the money in the machine and acquire the products.3
Retailing in the Philippines encompasses a whole range of venues including sari-sari stores (mom and pop stores), sidewalk vendors, wet and dry markets (produce and dry goods), groceries, supermarkets, hypermarkets, warehouse and discount clubs, large malls, mall stores and shops, and convenience stores, which are also known as c-stores (Omana, 2003). Largely, the Philippine retail industry is fragmented, but with the inroads of foreign retailers, the industry may see some level of consolidation (Lugo, 2002).
The lifeblood of Philippine retailing is the huge network of small mom and pop stores known as sari-sari stores. Sari-sari stores make up 90% of the retail outlets. These traditional-trade stores dominate in rural places of the Philippines. Sari-sari means various kinds, referring to the goods that are available in a wide range of sorts and sizes, from candies, detergent soap, toothpaste, canned goods, coffee, soft drinks and ice-cold beer, instant canton noodles to a load for your cell phone.
The informal retail sector in the Philippines portrays a wide array of small scale production that is usually operated by individuals or families. The sari-sari store is a retailing operation which lets the consumer purchase goods in their exactly needed amounts. These stores let the consumers buy products and goods by the unit rather than the entire parcel. This method known as “tingi” or sachet purchasing caters low-income earners who strive to buy food in whole package. A sari-sari store is normally allocated in a small portion of the owner’s house. Filled into this region are the display room, stock room, and a small working place. Transactions are made through a broad window with the customers remaining outside the store. Commodities are displayed in a large screen-covered or metal barred window in front of the shop. Candies in recycled jars, canned goods and cigarettes are often displayed while cooking oil, salt and sugar are often stored at the back of the shop. Many items are hung from the ceiling or on the walls to save space. Frequently a large signboard is drawing the attention of the customer, bearing the first, the last name or initials of the owner, here and there with sounding names. As a rule, alongside the store name, prominent advertising material of the main supplier, usually a cigarette brand, soft drink company or beer brewer is printed. Wooden tables and benches are set up in front of the shop for their patrons; this hangout (tambayan) offers a shelter from the hot sun during day time and gives refuge from the tropical rainfall. It is a place where you can meet friends and neighbors and catch up on the local gossip (chismis) around the block whenever you like.
These humble convenience stores (tindahan) have been up and around for many years, it is believed that the first stores date back more than 500 years ago. Sari-sari stores became popular when the Philippine-Chinese trade was initiated during the Sung Dynasty Period. It served as trading posts in many parts of the country. Those wandering variety stores became stationary and it marked the start of its dominance. Sari-sari store is therefore a piece from the past, it is still present today and it will be there in the future.
A sari-sari store is mainly a retail operation. Thus, Sari-sari store owners developed retail techniques that will cater the needs of their consumers. In a low-income community, basic necessities are sold in single-use packets (tingi), allowing everyone to purchase the goods they need at an affordable price.
Eras before the dawn of the big companies, piecemeal purchase options like sachets dominated. During the mid-16th century, the time after Spaniards landed in the Philippines, early records state that sachet marketing was a common exercise among retailers which supplies the Filipinos with their basic needs. According to American anthropologist William Henry Scott in his book Barangay: Sixteenth Century Philippine Culture and Society, packaged palm sugar or kalamay among goods were sold in small packages, together with wild fruits, nuts, garden vegetables, and medicinal herbs. Scott admired the intelligence of the natives who even had mini weighing scales for gold lattice they used to receive as payments for goods sold. The term “alig-ig” was used for the practice of buying small packs at a time. Piecemeal selling then became a retail practice which was followed by the local sari-sari store owners. They tend to practice repackaging different types of products in smaller quantities in small paper packets, banana/coconut leaves, or reusable jars and bottles and sold at a very affordable price. This retail technique became a survival technique for the natives during the time of famine and scarcity immediately after the World War II. Even decades later, piecemeal purchase maintains to be a habit among Filipinos.9 “….Tingi literary means retail selling, by the piece, as when a pack of cigarettes is sold. But a Sari-sari storeowner would rather reserve the use of the terms to the situation in which the pack is opened and the cigarette sticks are sold individually…. Goods sold in tingi form are: cigarettes which are bought by the pack, opened and sold by the sticks; ginger, which is chopped and retailed by small slices; mosquito coils, bought per box of 12 or 16 and sold by the individual coil; vegetables like squash and sponge gourd, which are divided into many parts; biscuits, bought by the can and sold by the piece; fruits like watermelon, papaya and pineapple, bought whole and divided into smaller pieces; bond paper bought by ream and resold by the sheets; and cotton, originally in roll form and repacked into smaller lots….”
Producing one’s product in smaller and more affordable packs to increase market discernment is known as sachet marketing. It is commonly associated as a tool for penetrating the market at the bottom of the economic pyramid. Sachet marketing is famous and successful in the Philippines not just because of the prevalence of poverty but because of some critical factors like the existence of a retail distribution network known as sari-sari stores.
Piece by piece purchase choices like sachets give an innovative way of marketing consumer goods. Redesigning, repackaging and reselling a product in a smaller package at an affordable price are included in the process of sachet marketing. It does not only involve the physical product but also the whole marketing system. Selling products in micro packs are known to multinational companies in a booming economy like the Philippines. Most Filipinos (nearly 90%) buy products in mini sizes. This exhibits that sachets are fast being approved by consumers across socio-economic strata in emerging markets.
Several multinational companies in the Philippines such as Uniliver, Proctor & Gamble, and Nestle produced low-priced micro packs for day-to-day needs like shampoo, soaps, cigarettes, and foods. These sachets do not depict the most economical way of buying items but they reached the basic necessities of the Filipinos in terms of low purchase price. The wide variety of these products was retailed through the local sari-sari stores.
There are several factors that contribute to the success of sachets or micro packs. In Philippines, the small sari-sari stores facilitate the distribution of goods. Sachet packs are the enactment of “tingi” system also known as selling in retail. Retail stores would not literally survive without the sachets of products. A good distribution backbone should be well-planned in terms of tertiary selling. A factor contributing to sachet marketing success is an extensive network of corner stores that will carry the products.
“….the perceived top three factors favoring sachets are affordability or minimal cash-out for the consumers, portability or the convenience of the smaller packs, and setting of dosage that facilitates control over consumption. All the eight executives, regardless of product category, agree that sachet marketing has succeeded in the Philippines because of the low cash-out for the consumers, given the “total proposition of price and volume” for their immediate needs. It can be adjusted for promotional use, as well as for sustaining the presence of their brands among a wide spectrum of consumers across income groups. Due to portability and affordability, products in small packs are made available in practically all types of outlets – from mammoth wholesalers to ambulant peddlers – penetrating all segments of the society. It is precisely this flexible distribution channel, whether it is deemed systematic or not, that works as the substratum for the dynamic existence of sachet marketing in the Philippines.”
Sachets have for several decades now, been marketed by firms as a strategy to increase trials and market penetration especially in the economically underprivileged societies of the emerging markets. Very often the existence of an economic underclass is assumed to be a necessary prerequisite for the successful implementation of sachet marketing strategy. Our new theoretical framework, grounded in the relevant literature, is also coherent with the recent business practices. We find that sachet marketing strategy does not necessitate the prevalence of poverty, and the critical success factors are an extensive retail distribution, favourable socio-cultural factors, higher perceived value by the consumers, and technology to reduce packaging costs.
Sachet economy refers to the practice, especially in poorer communities, of buying consumer products such as detergent, shampoo, powdered milk, or beverages in single-use packages. A sachet economy encourages the consumption of small units of a product and is appropriate for consumers with very little money on hand. “I think the Philippines is a sachet economy in the sense that many Filipino consumers just have enough purchasing power to buy sachet packs of almost anything,” Cid L. Terosa, senior economist at the University of Asia and the Pacific (UA&P) said.17 “I think low household budget or purchasing power is responsible for the so-called sachet economy. Economies adopt a sachet economy because of the inability to allocate more money for regular-priced items,” Mr. Terosa said further.18 Economic experts observed that both local and foreign businessmen adjusted their packaging according to the needs of the people, especially those who belong to the poverty line. Poor people cannot afford bulk items, so investors packaged their products, mostly in sachets so as to draw more income from them as their primary consumers.
Statistics show that almost 50 % of the country’s population of almost 80 million belongs to the poverty line. Because of this, business analysts described the prevailing situation as synonymous to a “sachet phenomenon”. The devaluation of peso contributed to this kind of economic upheaval. The more the peso devaluates, the more sachet products are being introduced by the business sector.
Businesses -big and small- have resorted to product downsizing in various ways and for various reasons. Producers would openly and legitimately downsize during uncertain times, when customers are cautious and are not in a spending mode/mood and would rather stick to a bare-bones budget. They would downsize in order to sell to low-income markets they otherwise wouldn’t be able to reach with their bigger, more expensive packages. Low-income Filipino earners would prefer to buy “tingi-tingi” packs which sari-sari stores, market vendors and itinerant peddlers are masters of. Thus, basic food products like sugar, pepper, flour, cooking oil, powdered milk, coffee, vinegar, soy sauce, fish sauce, and so many others are now being sold in small sachet packs. Similarly, other basic necessities like laundry detergent, dish washing liquid, bath soap, shampoo, toothpaste, and cooking fuel have been packed in smaller sizes.
“…Smaller product sizes enable consumers to cope through usage-economization, and defer substitution or elimination of the item. For example, single-usage packets of shampoo or toothpaste permit the infrequent usage (e.g. special occasions) among low-income consumers who are known to convert to ordinary bath/laundry soap in place of shampoo and to salt instead of toothpaste. Down-sizing could encourage trial usage by minimizing monetary risk, as well as sustain brand loyalty by reinforcing consumers who are hiyang or sanay to the brand through the maintenance of usage…
Corinna T. De Leon, “Consumer trends in the Philippines: Marketing in a Deteriorating Economy,” Historical Perspective in Consumer Research: National & International Perspective (1985), 173-181. Hiyang pertains to the tendency of Filipinos to develop a sense of unique compatibility with a particular product, and sanay means a trust in the product borne of habitual usage over Lime (Roberto, 1982a). Furthermore smaller packaging may be especially convenient for housewives who, as the purchaser of household goods, have to satisfy the varied preferences of j-he members of the typically large Filipino household without repressing her cost consciousness. Small packaging units conform to the traditional tingi-tingi system of small corner outlets called the “sari-sari store” which sell cigarettes by the stick, vinegar by the cup, and many household items repackaged into small plastic bags. Downsizing seems to be an appropriate response to the consumers need for tighter control over cash outlays. As such down-sizing could relieve the stress of purchase occasions for the majority of Filipino consumers who, in belonging to the low-income segment, are particularly vulnerable to anxiety…”
For millions of Filipinos, size does matter these days — the smaller, the better, because then they can afford to buy it. With the disposable income of Filipinos shrinking almost daily, many families now find buying in large quantities simply out of the question, and consumer-goods manufacturers seem to have introduced micro-marketing, also known as the make-it-small-and-snappy selling tactic or the sachet marketing strategy, just in the nick of time.
Open seven days a week and at an average of 14 hours a day, the small village stores play an extremely important economic and social role in urban centers, city slums, rural townships and small barrios.
A sari-sari store portrays a vital role in Philippine economy. The sari-sari store allows members of the community easy access to basic commodities at low costs. In the Philippines, numerous people earn just enough to feed them through the day, so they can only afford what they need for that day. Sari- sari stores follow the concept of tingi or retail so that a customer can buy ‘units’ of the product rather than whole package. This is convenient for those who cannot buy the whole package or do not need much of it.
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