$1.5B PH Small-Format Retail Boom Underscores Need for Seamless Logistics

Retail’s long-held belief was that bigger was better, but its future is now becoming small and compact due to the demands of a fast-paced world.

According to a report from Retail Asia, small-format modern-trade stores, such as neighborhood supermarkets, mini-marts, and convenience stores, are at the forefront of this shift, with the industry capturing a USD40 billion market in Southeast Asia in 2024.

“Consumers seek speed and convenience, but they also value a wide product selection,” said Jose Alvin Perez, Ninja Van Philippines Country Head. “The challenge lies in balancing these needs within just a 500-square-meter store.”

In the Philippines, known for ‘tingi’ or sachet culture, the industry reached USD 1.5 billion in 2022, complementing the ubiquity of sari-sari stores but offering a more structured retail experience.

“The rapid expansion of small-format modern trade in an archipelagic country presents an opportunity for brands to reach more consumers across diverse locations,” Perez noted.

However, this share is still low at 9%, up from 5% in 2013, compared to that of Indonesia, Thailand and Vietnam. A report by the Boston Consulting Group notes that while the small-format industry in the Philippines is underpenetrated, it has the potential to follow a similar pathway to its regional peers.

Adding to the economic hurdles of high inflation rates and high interest rates, the Philippine Retailers Association has identified disruption to logistics as a major challenge for retailers, leading to increased operational costs. Therefore, an efficient and agile logistics network, tailored to the unique challenges of the Philippine market, is crucial to unlock the potential of the small-format industry in the Philippines.

Small Format, Specialized Logistics Needs

Small-format stores pose significant logistical hurdles that require specialized solutions due to their distinct distribution landscape and smaller order volumes. They typically cater to niche markets and bustling residential communities outside the metro, many of which are inaccessible to standard six- or four-wheeler delivery trucks.

On-demand trucking services, designed for single-trip bulk shipments, are inefficient for delivering smaller drop sizes that are less-than-truckload (LTL). When a truck isn’t fully loaded, shippers are forced to either wait to fill the truck or absorb higher costs to account for the unused space.

Full truckload (FTL) shipping also poses challenges for multi-drop deliveries to small-format stores across the Philippines. Long travel times between scattered locations, unpredictable unloading delays, and costly empty return trips, especially in remote areas, can disrupt routes and drive up expenses.

“Since small-format stores have a high frequency of customer visits, it is crucial to ensure consistent stock levels across locations. Delivery challenges can cause out-of-stock or overstock situations which are both operationally undesirable,” Perez said.

Ninja Restock: Fueling Small-Format Rise

Ninja Van Philippines has stepped up its tailored solutions for this growing sector’s logistics needs. “Ninja Restock, our tech-enabled B2B service, provides manufacturers and distributors the flexibility to restock stores regardless of volume,” Perez said.

Optimized route planning can address challenges in servicing dispersed small-format locations with low-volume drops. By leveraging Ninja Van Philippines’ extensive network and e-commerce-speed lead times, Ninja Restock ensures timely deliveries for these small-format stores.

“Distributors looking to reach small-format stores can readily use our diverse fleet. This includes four-wheel vehicles for larger deliveries, as well as more agile two- and three-wheelers that can navigate tighter spaces and handle smaller volumes efficiently” Perez noted.

Ninja Restock also offers flat, per cubic meter rates shipments. This allows multiple shipments from different customers to share space within the same truck, reducing costs versus FTL. Because ensuring optimal stock needs a robust monitoring system, Ninja Restock uses tech-enabled tracking and management to provide full visibility over shipments across the Philippines. This gives businesses such as neighborhood supermarkets, mini-marts, and convenience stores valuable insights into their supply chain.

“Our fully integrated end-to-end operations ensure that store mapping and trip-routing are centralized to integrate with fleet and capacity planning,” Perez added.

For businesses aiming to capitalize on the thriving small-format market in the Philippines, partnering with agile, flexible, and efficient logistics providers is a necessity for sustained growth in a rapidly changing retail landscape. Embracing the small-format trend will require a commitment to adopting logistics strategies that align with the unique needs of the modern trade industry, ultimately providing consumers with a retail experience that suits their lifestyle.