THE DEPARTMENT OF AGRICULTURE would be better off tapping the existing network of hard discount stores (HDS) – DALI Everyday Grocery, which is funded initially by a loan of $15 million from the Asian Development Bank and another $13 million later, and O!Save of Robinson’s Retail Holdings Inc. (RRHI) – to augment its network of Kadiwa outlets in the government’s desire to sell affordable food items to low income consumers of major cities in the country.
Presently, there are 71 Kadiwa ng Pangulo (KNP) outlets, targeted to hit 179 this month. By mid-2025, 300 stores will rise, to reach 1,500 by the end of the Marcos administration.
Dali, the leading HDS, now has 630 stores as of last April. Before the year ends, the goal is 920 outlets.
Location is Paramount
Hard discount store chains, living up to its objective, were set up to make basic goods and food items affordable to the lower classes by sourcing unbranded stocks mostly from local manufacturers. HDS outlets have less marketing, merchandizing and operational costs.
If you’ve noticed, there are little or no store shelves as items are places in boxes. There are lesser sales assistants, promodisers, and hardly any airconditioning.
Location is paramount. These discount stores are mostly located in city centers and areas with high foot traffic.
Most Kadiwa stores are located within the compounds of DA agency offices. Others are mobile which have erratic and uncertain schedule of operation.
Hard discount store chains, living up to its objective, were set up to make basic goods and food items affordable to the lower classes by sourcing unbranded stocks mostly from local manufacturers.
No Contest
Dali, a Swiss-based retail chain, was first established in Sta. Cruz, Laguna in February 2020. Being small did not cause a stir to its major rival, Puregold.
But years later, it faced complaints and charges with regulatory agencies filed by Puregold. This did not make a dent in its expanded operations.
Not even sari-sari stores can approximate the low rates at HDS outlets because the latter sell mostly branded products purchased at wet markets and groceries that had already made a huge mark-up.
Rushing Expansion
In the next 12 months, O!Save, on one hand, expects to more than double its store network in its pursuit to close the competitive gap with HDS pioneer and market leader, DALI.
After doubling its footprint to 318 stores in the 12 months to September, O!Save is gearing to add around 382 stores through end-2025, according to Gina Roa-Dipaling, vice president at Robinsons Retail, in a report of Bilyonaryo.
“O!Save is accelerating expansion. They really need to scale up,” Dipaling said at an investors forum.
Expanding the store network will enhance O!Save’s capacity to contract manufacturers for in-house or private-label products, a critical factor for hard discount retailers to compete on price and affordability.
Pricing Strategy
The share of private labels in O!Save’s income improved to 17 percent of its $155 million nine-month revenue, up from 13 percent of $64 million in the same period last year.
However, the hard discount retailer’s profitability depends heavily on how quickly this share can grow.
O!Save was established in 2021 by investors who had previously departed from the emerging DALI, a company disrupting larger retailers with its pricing strategy.
Since the President’s instruction to DA is to make Kadiwa stores more accessible and strengthen its operations so more people can benefit from its lower-than-prevailing market prices, tying up with HDS would be a logical strategy.
A Business Model
How the competing companies would be able to gain respectable margins from their sales at prices that customers with tight budgets can afford would be an interesting case study for business students.
Other business conglomerates would be closely watching the HDS model of Robinson’s retail group. If this proves to be profitable, everyone would join the bandwagon. See how the generics pharmacy stores mushroomed?