4 Reasons Why Sari-Sari Many Stores Fail

why sari sari stores fail

Setting up a sari-store in the Philippine isn’t as complicated as many other businesses around. If you have a small vacant space in the backyard, skills in carpentry and basic arithmetic, and small capital, you can establish your micro retail facility.

Related: 9 Key Elements on How to Succeed in Your Sari-Sari Store Business

But not long after the store has opened for business, attracted patrons and established business relationships, product inventory began to dwindle and sooner than later the once promising sari-sari store closed its business for good. It’s a sad tale of failed attempts at entrepreneurship that’s too common among aspiring local businessfolks. Lack of training, discipline or understanding of basic cash flow principles can doom any business venture, startup or stable.

1. Lack of store management skills.

With lack of understanding between earnings, profits and capitalization, the problem with sari-sari store’s failure to prosperity can be traced to basic money management skills. It is important to be aware of daily cash flow, especially on a business with little profit margins. Without such vision from the store manager, it becomes a proverbial ‘naglaho na parang bula’ on how earnings going nowhere.

It helps to have a well-structured store management system in place:

  • Daily inventory of goods
  • Tabulation of cash flow — gross earnings, profits
  • Identification of most profitable goods
  • Identification of most popular goods
  • Checklist of items to procure to replish inventory

Sadly such daily practice might not exist or deemed unnecessary in a small store. Daily distractions — tending to household chores or kids nearby, engaged in a TV show installed inside the store to kill boredom, or relentless chat with neighbors to kill time. Without equipment such as cash register to save time accounting for goods sold for the day, the manual, labor-intensive accounting has to take place. Many store managers lack proper education or even basic training to handle the task, putting the future of the business in jeopardy.

2. Lack of cooperation among family members.

Family members who were not forewarned about picking items for household consumption or taking sales money for purposes other than to restock the store are likely culprits of a shop’s downfall. It’s quite too common that the most accessible money available is likely at the cash box inside the store. Having it used for daily expenses — school allowance for children or payment for electricity bill — is so tempting especially when payday’s still days away. The general lack of concern or awareness about the business can lead to the wrong way.

Worse, if the money was loaned from the bank or other individuals such as the dreaded “5-6” scheme to resupply inventory, where loan interest is likely higher than profits. The owner could embark in a vicious cycle and lead to getting buried in debt. Certainly that’s not what every store owner wants to end up with.

3. Lack of money handling skills.

With the basic understanding the difference between gross sales and profits, an owner may have a better view of what it takes to grow a business. Unfortunately, among those we talked to, they have vague understanding about it. To many of them, all earnings for the day are considered profits and can then be spent on paying utility bills, buying household items or financing school projects.

Although money was spent on legitimate purposes, it was never used to buy fresh supplies for the sari-sari store. As a result, owner has to find other sources to finance inventory replenishment. This can come from loans which charge high interest rates. Because sari-sari stores have low profit margin, such loans are not going to help a lot especially if profits are not high enough to cover interest repayments.

4. Relaxed attitude towards credit.

Filipinos in general have kind hearts. Store owners don’t want to play the role of a heartless neighbors when someone pleads to get a can of milk for her starving baby, to be paid later. Or a piece of band aid for small wound for a young kid hurt playing in the backyard. A heart of gold and goodwill gesture gets repaid, so they say. But in business, once you give credit, it’s sometimes understood as handout. Many relationships, personal or business, gets destroyed over unpaid debts and in many occasions those who owe you are the ones who get violent tendencies and call you inconsiderate or lack empathy when you simply wish to remind them of their obligations.

Family members or close relatives are also some of the worst culprits as they assume they get the preferential treatment when accessing store goods.

Surely there are exceptional cases, but these are breeding grounds for abuse. The next thing you realize, as a store owner, you’re already chasing half dozen folks for unpaid grocery items, blacklisting some of them as relationships turned sour.

In conclusion, every business should be run by knowledgeable, dedicated personnel. Owning a sari-sari store business is not an exception. Once you lack basic entrepreneurial spirit, or offer half-hearted dedication, plus lack of vision and discipline to run and grow the business, you are leading the business towards failure.

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