CHAPTER 1

THE PROBLEM AND ITS BACKGROUND

Introduction Divisoria is one of the biggest commercial centers in the Philippines. The Philippine economy has two sectors the formal and informal. In Divisoria, the mall vendors fall under the formal sector while the street vendors are considered as informal. Although both vendors acquired permits to trade, there were aspects which hinder street vendors to be a part of the retail industrys formal sector. These aspects were discussed in Chapter 2 of this study. Mall vendors and street vendors belong to the same industry, the retail industry wherein direct selling of product to consumers is involved. The researchers chose 168 Shopping Mall vendors and those street vendors operating around its vicinity to be their subjects because they represent the formal and informal sectors, respectively. Their study aimed to discuss the following: the factors or indicators of competition between 168 Shopping Mall vendors and the street vendors vending outside the malls vicinity; and as to how such competition affect both vendors; moreover, up to what extent could the government do to regulate competition between them. This research could be remarkable to the future researchers, to the vendors in Divisoria and other areas in the country, to the local government of Philippines, and to the consumers.

2 Background of the Study Divisoria is a great place for business-minded tourists. It is the best place to haggle from stall to stall selling all sorts of products. Divisoria or Divi, as regular customers call it, is a conglomerate of tiangge or flea markets, wet and dry market, malls and thousands of street vendors spilling out on Recto Avenue, Juan Luna St, and numerous side streets (Viakeo Travel Guide). Divisoria has two sides, the Tondo side of Divisoria and the Binondo side of Divisoria. One of the malls that can be found in Divisoria is the 168 Shopping Mall. The number 168 is said to be a lucky number for most Chinese merchants and it can be read as or mean road to success (Lacap, Enzo 2011). It can be considered as haven for the cheapest but trendiest clothing and accessories. Over a hundred stalls from floor to floor and even a food court can be found inside this mall. Streets like Soler, Sta. Elena or Felipe makes it easy to access the entrances of 168 Shopping Mall. The much-awaited 168 Mall Phase Five is now functional. There are now more stalls to choose from. On the other hand, the street vendors are dispersed around Divisoria. Each stall sells different products like vegetables, clothes, footwear, fashion accessories, gadgets, utility items, etc. There are two kinds of street vendors in Divisoria: the legal vendors and the illegal. Those who operate on the sidewalks are considered legal while those operating in the middle of the streets are illegal (Santiago, 2011). Street vendors are considered as nuisance in the streets of Divisoria regardless of their legality. They are the major cause of traffic and messiness in the area. The very reason why the local authority are arresting them whenever they were caught vending on the streets of Divisoria. Despite the violence, these hawkers manage to operate on a daily basis.

3 According to one of them, in an informal interview that the researchers conducted, they are used to it (the violence). As mentioned earlier, 168 Mall extended its facilities in the Tondo side of Divisoria. This could add up to the worries of street vendors. The Philippine economy has two sectors namely, the formal and the informal sectors. The CPBI is one of the designated statistical activities in the System of Designated Statistical Activities undertaken by the NSO (Ericta, 2009). The statistical unit or unit of enumeration used in the 2006 CPBI is the establishment. An establishment is defined as: an economic unit under a single ownership or control, i.e. under a single legal entity, engaged in one or predominantly one kind of economic activity at a single fixed location. Thus, 168 Shopping Mall falls under this category. Informal sector, on the other hand, consists of small-scale, self-employed activities (with or without hired workers), typically at a low level of organization and technology, with the primary objective of generating employment and income (ILO, 2000). Hence, Divisoria street vendors fall under this sector. A further discussion on both sectors can be seen on Chapter 2 of this thesis. As stated above, mall vendors, specifically 168 Shopping Mall vendors and street vendors, particularly those who vend near the area of the said mall, belong to the retail industry. Retailing, which accounts for twenty percent (20%) of the worldwide labor force and includes every living individual as a customer, is the largest single industry in most nations (Dunne & Lusch, 2008). Any firm that sells products or provides services to final consumers, regardless of what they are selling is considered as retailers. Hence, the competition discussed in this study is restricted to that of the retail industry.

4 Thus, the researchers decided to embark on this study. The respondents were chosen for the following reasons: 1) they are part of the formal and informal sectors of the Philippine economy, 2) the street vendors both legal and illegal compose the largest part of Divisoria, 3) 168 Shopping Mall is the most popular establishment in Divisoria. The last two would imply an arising competition between the two sectors. Therefore, from this study, readers are expected to know the factors and effects of competition between 168 Shopping Mall vendors and those street vendors operating around it. The future researchers were expected to use this as basis for their study or to update the results that the current researchers gathered. The vendors from both sectors were anticipated to be sensitive for each others needs. Local government was projected to augment the present rules and regulations for street vending or hawking to normalize the competition between the two vendors not just in Divisoria but nationwide. Lastly, the consumers were expected to be objective in choosing and procuring their needs and wants.

Statement of the Problem This study aims to determine the factors of market competition between the 168 Shopping Mall vendors and the surrounding street vendors in Divisoria. Specifically, the researchers sought to answer the following questions: 1. What is the demographic profile of respondents? 1.1 168 Mall Vendors and Divisoria Street Vendors a) Profile of the Respondents Gender

5 Age Civil Status Educational Attainment Previous Employment b) Profile of Business Trade Category Number of Employees Number of Years in Business Starting/Initial Capital Capital Source Daily Gross Income 2. What are the factors of market competition between the 168 Shopping Mall vendors and Divisoria street vendors? 1.1 Price 1.2 Product a) Acquisition of Products/Production b) Product Offerings c) Quality 1.3 Location or Access 1.4 Marketing Strategies a) Promotion Strategy b) Packaging c) Market Determination

6 d) Distribution Strategy 3. What are the effects of the competition to both vendors? 4. What government assistance can the local authority extend to 168 Shopping Mall vendors and Tondo side street vendors in Divisoria to have a healthy and fair competition?

Objectives of the Study 1. To know the demographic profile of respondents 1.1 168 Mall Vendors and Divisoria Street Vendors a) Profile of the Respondents Gender Age Civil Status Educational Attainment Previous Employment b) Profile of Business Trade Category Number of Employees Number of Years in Business Starting/Initial Capital Capital Source Daily Gross Income

7 2. To identify the factors of market competition between the 168 Shopping Mall vendors and street vendors in Tondo, Divisoria 1.1 Price 1.2 Product a) Acquisition of Products/Production b) Product Offerings c) Quality 1.3 Location or Access 1.4 Packaging 1.5 Marketing Strategies a) Promotion Strategy b) Packaging Strategy c) Market Determination 3. To determine the effects of competition to both vendors 4. To identify the government assistance that the local authority can extend to 168 Shopping Mall vendors and Tondo side street vendors in Divisoria to have a healthy and fair competition

Assumptions This study assumed that competition between street vendors and mall vendors is unhealthy.

8 Significance of the Study This study was conducted to determine the factors of the market competition between 168 Shopping Mall vendors and the surrounding street vendors. The data that were gathered and collected could be beneficial: To the consumers. For them to realize the significance of both vendors in the market and their contributions to the countrys economy. To the local government. For them to recognize the actual assistance and support they were longing for and that they would help in promoting a fair competition not just between 168 Mall Vendors and the surrounding street vendors but also among other vendors of same kind nationwide. To the mall vendors and street vendors. This study can help them in providing quality goods and/or services to their customers and promote fair competition with each other, and voice out the assistance and support they wanted to receive from the local government. To the aspiring mall vendors and street vendors. They will know what to expect upon entering a business. To the future researchers. That they can make further studies by applying the findings the researchers had established. Otherwise, they would update the outcomes discussed here.

Scope and Limitations of the Study This study primarily focused on the factors and effects of the market competition between and to 168 Shopping Mall vendors and street vendors around its area. The

9 researchers in choosing their respondents, for mall vendors, set the following criteria: 1.) must be the owner of the stall; 2.) must be selling any one of the following, clothing, fashion accessories, footwear, and utility items; 3.) must have posted permits from local agencies like BIR. For street vendors: 1.) must be the legal vendors or those operating within the parameters set by the local government; 2.) must be vending on any of the these streets, Claro M. Recto St., Juan Luna St., and Roman St., Tondo, Divisoria; 3.) and must only be selling any one of these items, clothing, footwear, fashion accessories, and utility items. Any vendor who did not meet any of the criteria mentioned above was excluded from this study. The factors of competition discussed within the study were limited to the concepts in the retail industry only. Due to the confidentiality of the information the researchers were asking from the management of 168 Shopping Mall, they had to do a physical count on the number of stalls. Counting became easy for them when a mall employee told them that each corridor of the mall has eleven (11) stalls. The researchers used the Slovins formula in acquiring the sample size. However, due to time constraint, they had to cut the sample size for each population to fifty-two (52). The researchers employed interviews and questionnaires as instruments of their study.

Definition of Key Terms Accessories. Decorative items that supplements ones garment such as necklace, hair clips, and more.

10 Business Plan. A blueprint that helps a small business owner determine what resources are needed to achieve his or her business goals Clothing. Something that is used to cover a human trunk and limbs like underwear, shirts, shorts, pants, etc. Conglomerate. A number of different businesses that operate in diversified fields Consumer. A person who can make a decision whether or not to purchase an item Distribution. It refers to the process of moving goods and services from firm to the buyers. Footwear. Any article intended to protect and comfort the feet like shoes, slippers, and sandals, and more. Formal Sector. An economic unit under a single ownership or control, i.e. under a single legal entity, engaged in one or predominantly one kind of economic activity at a single fixed location. Gross Income. An individual's total personal income before considering any deductions. Hawker. An individual who sells wares by carrying them through the streets Informal Sector. It consists of small-scale, self-employed activities (with or without hired workers) typically at a low level of organization and technology, with the primary objective of generating employment and incomes. Marketing Strategy. A process that allows sellers to focus his or her resources to increase sales Packaging. The wrapping material around a consumer item that contains and protects a product

11 Price. A value that will purchase a definite quantity, weight, or other measure of a good or service offered by sellers to buyers. Production. The means of acquiring goods or products sold by sellers. Promotion. An activity such as posting ads, giving out flyers, and sales talk to increase visibility or sales of a product. Quality. A measure of excellence or a state of being free from any defects and deficiencies Retailing. Consists of the final activities and steps needed to place merchandise to made elsewhere into the hands of the consumer or to provide services to consumers. Shopping Center (or mall). A centrally owned or managed shopping district that is planned, has balanced tenancy (the stores complement each other in merchandise offerings), and is surrounded by parking facilities. Street Vending. A business wherein merchandise are placed in the open air rather than in a shop or store. Street Vendor. An individual who engages in street vending Target Market. A specific group of consumers at which a business owner aims its products Tiangge. A group of stalls inside a building; more technically means a flea market Utility Item. Any item that can be of practical use for human wants such as stainless wares, lamps, or chair Vendor. Anyone who promotes or exchanges goods for money

12 Acronyms ASPBI BIR CBD CPBI ILO MMDA MoU MV NSO OIC PSNA RA SV WM VI Annual Survey of Philippine Business and Industry Bureau of Internal Revenue Central Business District Census of Philippine Business and Industry International Labor Organization Metropolitan Manila Development Authority Memorandum of Understanding Mall Vendors National Statistics Office Officer-in-Charge Philippine System of National Accounts Republic Act Street Vendors Weighted Mean Verbal Interpretation