There has to be a serious design flaw in this company’s business model.
The Dali chain of convenience stores, owned by Hard Discount Philippines, Inc., tried to beat the competition by offering lower prices. Those lower prices, however, was made possible only by selling knockoffs of questionable quality.
The retail chain appears to have also cut back on staff training. Numerous complaints concerning the discourtesy of the chain’s selling staff were lodged.
The knockoff products mimicked the genuine ones. This led to complaints concerning unfair trade practices from legitimate manufacturers. Dali’s products came under the microscope.
The Intellectual Property Office of the Philippines (IPOPHL), responding to the complaints, slapped Dali with an injunction. Specifically, the store chain was asked to withdraw three products from their shelves. Depending on the outcome of the inquiry, Dali could be asked to replace the cheaper knockoffs with the genuine items, undercutting the chain’s pricing advantage.
In addition, the products on Dali’s shelves are now under scrutiny from the Food and Drug Administration (FDA). It appears that at least some of the products being sold in Dali stores have not been registered with the regulatory agency. There are products sold there that do not conform to Philippine labelling regulations. Consumer safety is on the line here.
On top of all these, the store chain could be facing copyright infringement charges. The judicial proceedings could be long and messy.
All of the above, it turns out, is just the tip of the proverbial iceberg.
Dali is a losing business – although the speed with which it sets up outlets might suggest otherwise.
Since Dali opened its first discount grocery store three years ago, it has lost a staggering P3.26 billion. In 2022, the company lost P894.6 million. In 2023, its losses more than doubled to P1.8 billion.
The more stores it opens, the greater its losses. This does not seem sustainable in the longer run.
Businesses normally lose money in the first years of their operation. They then trim their losses as they move on towards profitability. In the case of Dali, however, the losses are not only staggering. Instead of holding back the bleeding in its second year of operation, Dali is doubling its losses.
The pattern of loss could be symptomatic of deeper issues. This could involve poor management, inefficient cost structures or weak sales performance. It could involve all of the above.
Let the experts examine what is wrong with this business. My own amateur assessment is that the company took the wrong first step.
A retail enterprise must begin by respecting the consumer. Dali did not do this.
Sanitary landfill
Central Luzon might just have been saved from the scourge of flooding in the future.
The massive flooding we experienced in the wake of Typhoon Carina was due, in large part, to the congestion of waterways because of indiscriminate trash disposal. This is because we lack sanitary landfills to absorb the sheer volume of trash we produce. President BBM correctly observed that much of the flooding was due to the irresponsible handling of our trash.
A few months ago, the BCDA and the Clark Development Corporation (CDC) decided to shut down the Kalangitan Landfill in Capas, Tarlac. This landfill embodies the far-sightedness of its investor, the Metro Clark Waste Management Corporation (MCWM).
That far-sightedness is the complete opposite of the short-sightedness of the BCDA and the CDC. They wanted to close down a functioning landfill without any ready alternative.
Over the past two decades, Kalangitan landfill efficiently served over 150 local government units and over 1,000 industrial clients from the Metro Manila area, Central Luzon, Pangasinan and the Cordilleras, including Baguio City. Shutting it down would mean that hundreds of thousands of tons of garbage would probably be dumped into our waterways, making widespread flooding an absolute certainty.
We have fresh information that the BCDA/CDC has reversed its decision to shut down Kalangitan landfill. They did not do this because of President BBM’s observation about our irresponsible trash disposal practices and his instruction to government agencies to do better. Nor did they do this because of some genuine concern for our flood-prone communities.
It turns out that shutting down the Kalangitan landfill would be patently illegal. Vicky Gaetos, Metro Clark executive vice president, asserted that the trash disposal project was protected under Republic Act 7652 or the Foreign Investor Long-Term Lease Act. This allows foreign investors to lease land in the country for up to 75 years.
With a German group as shareholder, Metro Clark qualifies under this law. This means that the contract to build the landfill has until 2049 to do business in the area.
The abrupt decision of the BCDA/CDC to shut down the landfill does not stand a chance to win in a judicial proceeding. If, by chance, the law is not upheld in our courts, this would send a very wrong signal to the international investment community. It will torpedo confidence in the very laws that sought to assure international investors.
The perils of shutting down the Kalangitan landfill are, therefore, multifold. Without any sanitary landfill of any scale to approximate the volume of garbage we generate daily, the scale of flooding would only increase. Meanwhile, investor confidence in the reliability of our policies will be undermined.
What we should do now is to invite more investors to consider more sanitary landfill projects.