This Startup Is Helping Sari-Sari Stores Earn More
Imagine you’re a sari-sari store owner. You’re probably selling all the usual stuff—shampoo sachets, canned goods, candy, coffee, etc.—from the front of your house. You or another member of the household man the store during the day, sneaking out for minutes at a time for meals and bathroom breaks. Perhaps you close for a few hours once or twice a week to buy more merchandise at the local supermarket or grocery store, lugging all of the items back by hand by tricycle or jeepney. And all for earnings of less than P3,000 a month.
There are approximately one million sari-sari stores in the Philippines today. A staple of the Filipino way of life, they have remained largely unchanged for decades. Until now.
Growsari is a startup that addresses a simple pain point in the typical sari-sari-store business: what if owners could choose the items they need to sell, order them online, and wait for them to be delivered, all without ever leaving their homes?
The startup does this through an app which partner stores can access. Stores order through the app and Growsari delivers the items straight to the store the next day. The best part (at least for the stores) is deliveries are free of charge. Plus, there's the added convenience of not having to physically leave the store to go out and buy fresh merchandise. On the part of Growsari, because they can combine orders from multiple stores, they can buy the items at relatively lower prices, which is how the company earns.
To be sure, the entire process is not without its limitations and difficulties: specific orders can go unfulfilled, deliveries can get delayed, plus a host of other logistical problems. But Growsari is learning as it chugs along, applying fixes whenever possible. If you think about it, the whole idea is so simple you wonder why nobody thought of it before. It wasn’t for a lack of trying, though.
Business model
“Anyone who has worked long enough in consumer goods in this region (Asia Pacific), would need to contend with the opportunities and challenges brought about by the ‘mom and pop,’ channel,” Growsari co-founder and CEO Reymund Erwin “ER” Rollan tells Esquire Philippines. “It’s largely an Asian phenomenon. All of the clients and companies I’ve worked with in the past continue to struggle with how best to engage, activate, and understand this channel better. And they can’t not understand it because half of the category volume today still passes through it.”
Rollan, who worked for years in Singapore with companies such as Procter and Gamble, Boston Consulting Group, and Unilever, says this was his starting point in establishing Growsari. As an industry practitioner, he realized that winning in this channel was just too expensive and inefficient.
On the other hand, having grown up in the Philippines, Rollan understood how sari-sari stores are a social and economic pillar of society. He knew how these humble enterprises help solve unemployment and are one of the most fundamental businesses a person can get into.
“Most importantly, it’s probably one of the only few industries that allows store owners to create a meaningful synergy between being a businessman/woman, a homemaker, and a person of influence in the community—all at the same time,” he adds. “This is unique to being a sari-sari store owner.”
Of course, this is on top of the fact that their reach and access to Filipino families are unparalleled; there’s a sari-sari store in nearly every corner of every street in every town or city.
But Rollan says they never expected sari-sari stores to be more than what they are today. Growsari as a startup saw the potential of transforming the stores not only to help fast moving consumer goods (FMCG) companies distribute their products and services better, but to uplift the lives of the store owners and the communities they serve.
“I think from the very beginning, we already felt (that this idea was going to work). Every conversation with sari-sari store owners even during our design phase confirmed that this is something that could unlock their potential. It was never a question on impact and potential, it was really a question of our ability to turn this into a business. If we didn’t do this, someone else will.”
Leaving the Philippines
After graduating from the University of the Philippines, Rollan immediately flew to Singapore to work at P&G and begin his career in the FMCG industry. But he says he had always harbored dreams of returning to the Philippines and giving back. There were many opportunities over the years, but the idea for Growsari just stood out and made it hard for him to pass it up.
“Growsari is unique in that this business’s success is dependent on our ability to genuinely improve and impact the lives of sari-sari store owners and economically challenged communities in the Philippines,” he says. “I couldn’t pass on that opportunity.”
It was hard enough to pitch an untested concept to potential investors, but what was even more difficult was earning the trust and loyalty of their clientele—the sari-sari stores. Rollan says that, especially in the beginning, stores refused to transact with them because some of them thought of it as a scam.
“These store owners have hard-earned capital and they’re not going to risk it on just any other platform.,” he says. “I think it’s important that we stay true to who we are as a platform—that we are here to genuinely help. The convenience and savings we are able to give these stores is so tangible. They just needed to get over the 'distrust' hump.”
And so during the process of onboarding their first 100 stores, Rollan says it was his team of three people, including him, who personally walked up to stores to explain the platform. When the orders came, they would do the grocery shopping themselves—picking and packing the orders to make sure everything was there and the order was complete. Then, they would drive to the store to personally deliver the merchandise.
“We weren’t always successful in convincing them but it gave us a real insight into what happens on ground,” Rollan says. “This is so instrumental in the design of the whole platform ecosystem. To this day it’s very important for us to go to the field regularly and do order preparation and delivery to ensure we understand the pulse of the market and the needs of our customers.”
Of course, it was also hard to build the platform itself. Rollan says there was no existing model or tech solution for what they were trying to accomplish and so the Growsari team needed to create and develop everything from scratch.
“We really had to build our tech brick-by-brick by incurring mistakes and learning from the ground,” he says. “To this day, our platform continues to evolve as our network size increases. I do think that this approach (hopefully) is what’s going to give us a long-term competitive edge in this space.”
Big-time investors
Growsari has attracted some big-name investors on its side that believes in its potential. During its Series A funding round in 2018, JG Summit Holdings and Robinsons Retail Holdings reportedly invested in the company, part of a total funding round that was worth a cool $14 million, one of the largest in the country. Robinsons is now also a partner of Growsari—some of its supermarkets act as Growsari’s fulfillment hubs, where its personnel purchases clients’ orders.
But just like the sari-sari stores that are the lifeblood of its operations, Growsari is in a low-margin business. In order for the business to become viable and sustainable, it needs what many other businesses need: scale.
According to a previous story about Growsari on the online news platform The Ken, Growsari has about 25,000 sari-sari store clients. It currently records $60 million in annualized gross merchandise value (GMV), or the total sales a company makes within a specific time period. Rollan declined to discuss specific financial details, but The Ken story says the company expects to become EBITDA-profitable by next year with a goal to reach $200 million in annual GMV. And from 25,000, the company hopes to reach 200,000 sari-sari stores by 2022.
In addition, Rollan says Growsari is already talking to other companies who would like to tap into its platform and growing network and turn it into a distribution infrastructure for their own products and services. These are companies engaged in ecommerce, logistics, other e-services, and even banks and financial services.
“We welcome and encourage this,” he says. “We can’t do this transformation on our own so we would love to work with anyone who’s interested in this space.”
As for the effects of the coronavirus pandemic to the business, the CEO says it helped everybody rethink their digital strategy and accelerate adoption. People also realized how essential sari-sari stores are in providing much-needed food and supplies and that store owners needed a safer way to continue their operations. Which, of course, really helped grow interest and adoption to Growsari’s delivery business.
Growsari co-founder and CEO ER Rollan
Sari-sari of the future
From a team of three in 2016, Growsari currently employs roughly 400 people. Rollan says the company expects to grow more in the coming years and is therefore expected to create “thousands of jobs more.”
There’s a belief runnning in some business circles that retail as we know it now is set to be upended in the next few years. Grocery shopping, in particular, is seeing a shift from traditional “mom-and-pop” enterprises—like sari-sari stores and small neighborhood groceries—into larger-scale supermarkets and convenience stores. We’re seeing it, for example, in Edgar “Injap” Sia’s aggressive expansion of his MerryMart Grocery stores (which recently made its debut on the stock market) as well as his CityMart chain of community malls, where he leases out space to supermarket partners like SM or Robinsons.
But Rollan remains unfazed and believes sari-sari stores will remain relevant for years to come.
“There’s so many things going in favor of sari-sari stores,” he says. “The store owners don’t pay for rent in most cases because it’s their homes. They don’t pay salaries because they run their own shops. Running a modern trade store is always going to be exponentially more expensive, which will always limit their reach. Modern retail stores will continue to be at least a tricycle away, but sari-sari stores will remain to be the most convenient access point to any Filipino family.”
