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The neighborhood sari-sari (variety or general) store is part and parcel of daily life for the average Filipino.  Any essential household good that might be missing from one’s pantry – from basic food items like coffee and margarine, to other necessities like mosquito coils, soap, and matches – is most conveniently purchased from the sari-sari store nearby at affordably-portioned quantities, sometimes even on credit.  Apart from the most affluent communities, the sari-sari store is a constant feature of residential neighborhoods in the Philippines both in rural and urban areas, proliferating even in the poorest squatter communities.  About 93 percent of all sari-sari stores nationwide are located in residential areas (Bonnin, 2004: 80; McIntyre, 1955), and are typically operated from a portion of the owner’s house (Chen 1997; Bonnin, 2004; McIntyre, 1955; Silverio, 1982).

As early as the 1950s, residential areas in Metro Manila exhibited “a widespread scattering of tiny neighborhood stores,” the most common of which is the sari-sari store (McIntyre, 1955: 66).  He describes these stores in greater detail:

“…the store is merely an open, stall-like recess on the lower floor of a dwelling. Nearly every block has one to four such stores, located on the corners of the crossroads, with an occasional store in the middle of the block. The range of customers must be limited to the immediate vicinity. Poor neighborhoods, even the most destitute group of squatters’ shacks, have a surprisingly large number of these stores.” (McIntyre, 1955: 66)

Nearly three decades later, Silverio wrote, “No single socioeconomic institution in the country today boasts greater numerical presence in a Philippine community than the sari-sari store.  Sari-sari stores dot the neighborhood landscape so profusely that sometimes only a single house separates one from another” (Silverio, 1982: 59).  His observation is just as true today as it was twenty-five years ago.  In a more recent study, Bonnin (2004: 105) observed that it was not unusual to find four or five stores within the same short block, and in one instance, three stores were located side-by-side in adjacent homes.

Although both Silverio and Bonnin conducted their research in urban communities, the popularity of the sari-sari store is not exclusively an urban phenomenon.1 As may be expected in less densely populated areas, rural sari-sari stores are fewer and farther in between but just as present as their urban counterparts.  An early study by Stoodley (1957: 237) observed that each Tagalog barrio or village has at least one sari-sari store, usually run by a woman.  One can expect the same today in the more remote villages.

The fact that many stores are often clustered in the same area, especially in the urban areas, leads one to suspect that this is not a particularly lucrative income-generating activity.  These stores carry the same types of goods, charge similar prices for these goods (Bonnin, 2004), and therefore compete based on their location.  However, the numerous competitors operating in the same neighborhood limits the market share of each store in a given community.  Also, these stores are appear to be more common in poorer neighborhoods (Chen, 1997; Silverio, 1982; Bonnin, 2004), where purchasing power of potential customers are low, and therefore, the potential market for retail goods as a whole is likely to be small.  Indeed, store owners recognize that excess competition is a problem (Bonnin, 2006: 105), and many claimed that their stores were “just breaking even” and not making any profits (Bonnin, 2004: 103).

More recently, a study by Coke (2002) on microfinance group lending finds that 35 percent of women borrowers in the Western Visayas region choose to invest in a sari-sari store, even though group members are typically neighbors.  Market research studies by AC Nielsen report that the number of sari-sari stores nationwide grew by an estimated 88 percent between 1997 and 2000 (Bethge, 2003), 14 percent in 2002 (Bonnin, 2004: 80), 13 percent in 2003 (Capistrano, 2005), and 7 percent in 2004 (Amojelar, 2006).  These studies confirm the observation that the sari-sari store has remained popular as a micro-enterprise, resulting in a growing flow of new entrants despite the oversaturation that already seems to exist.

Despite excess competition, price markups remain high (Chen 1997), and sari-sari stores continue to grow, accounting for 90 percent of the country’s total retail outlets (Olarte and Chua, 2005).  Given that the profitability of such an enterprise is limited, why is there no downward pressure on prices?  What explains the continuous flow of new entrants?  Perhaps more obvious is why women are more likely to pursue this type of activity.  One might argue that women are likely to choose home-based livelihoods because they are constrained by domestic responsibilities.  However, if this is the case, then any profitable home-based enterprise should suffice.  Does the sari-sari store offer women particular benefits that are not available to men?

Using an agent-based rational choice approach, this paper attempts to explain why sari-sari stores persist, and why they seem to defy neoclassical profit maximization.  This paper argues that the sari-sari store is an innovative enterprise that allows households to combine both production and consumption objectives and overcome binding constraints on their investment and employment opportunities.  As such, sari-sari stores cannot be expected to respond to the same economic conditions as a typical capitalist firm would. These additional factors that influence the entry and exit decisions of store owners create a wedge between the traditional basis for profit maximization and the relevant basis for optimization from the agents’ point of view.  Therefore, economic conditions that already appear unprofitable in the traditional sense may still induce entry of new stores, consistent with the development path of sari-sari stores in the Philippines.

This paper draws on the qualitative work of three researchers on sari-sari stores in Metro Manila, representing three snapshots of the development of sari-sari stores over the last 25 years.  The earliest and most comprehensive study was conducted by Silverio (1982), who reported five detailed case histories of sari-sari stores located in two low-income communities, one middle-income community, and a mixed low- to middle-income community.  The second study was conducted by Chen (1997), which surveyed communities that had bustling informal sector activities.  Stores were randomly selected in proportion to the population of each selected area, but he does not mention which areas are included, nor the number of observations, and instead cites averages for the entire sample.  The most recent study is by Bonnin (2004), who conducted a qualitative survey of 30 women sari-sari store owners in 3 Metro Manila communities experiencing insecure housing.

The analysis begins with a discussion of the determinants of demand for sari-sari store products in Section 2.  Section 3 provides an analysis of the supply behavior of potential and existing store owners and offers an explanation for why the sari-sari store has been predominantly a woman’s activity.  Section 4 concludes and outlines areas for future research.

1There is no clear history of how the sari-sari store emerged, although Silverio (1982) suggests that the sari-sari store dates back to the Sung dynasty period (1127AD) when Philippine-Chinese trade began. Other accounts confirm the establishment of Chinese agent stores during the Spanish period (Wickberg, 1962: 280), although other retailers may have also existed outside the Chinese network.

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