FFE Magazine

Ukay-ukay business: Is it still Feasible?

The ukay-ukay (a Filipino version of the flea market) has successfully carved its own niche in the country’s local clothing industry. Inside these second-hand clothes stores, shoppers are forced to dig or sift through endless racks of clothes for a good find. This manner of search is called halukay in Filipino, from where the name ukay-ukay comes.

 

The spread of ukay-ukay shops have made the practice a norm among Filipinos. The allure of inexpensive clothes continue to draw people inside these shops to look for branded clothes for less and eclectic but tasteful pieces. Ukay-ukay remains appealing because it’s the practical choice for clothes shoppers on a tight budget.

 

 

To prove a point, Baguio’s ukay-ukay street market is still a hot target of gift-givers and clothes shoppers from Metro Manila.

 

Advantages and disadvantages

 

Despite the spread of ukay-ukay stores, the business of second-hand clothing is still lucrative in sizeable cities and towns all over the country. If you want a steady stream of income with a fast turnover for you or your family in the Philippines, then an ukay-ukay business is a profitable choice.

 

One of the advantages of ukay-ukay is that the pricing totally depends on the entrepreneur. Of course, competition with nearby ukay-ukay shops and branded clothes shops can dictate the pricing of clothes. But with freedom in pricing, an entrepreneur can price the goods so that he or she will not incur a deficit.

 

Profit is also quick as it is dependent on a per-sale basis. Entrepreneurs must be ready to negotiate wisely with customers who haggle - a common practice in ukay-ukay stores. Php10-20 off is reasonable to retain customer loyalty, but entrepreneurs should only give in if the discounted sale will still lead to a profit.

 

 

Expenses for security and upkeep of an ukay-ukay business highly depends on overhead rates like rent, electricity and store assistants and other essentials like shelves, racks, hangers, and a security system.

 

A disadvantage of owning an ukay-ukay is that it takes time and a tremendous amount of patience to run the business. Acquiring bales, sorting through mountains of clothing, pricing and finally preparing them on the racks will require effort. Knowing how to price the goods to be able to attract buyers and still make a profit can be mentally exhausting.

 

In addition, pricing and restocking is highly volatile since sales depend on the season.  This makes ukay-ukay a business only for entrepreneurs who can provide direct and hands-on control of the flow of labour and items. An ukay-ukay is not recommended for entrepreneurs who are based abroad. However, they can advise their families back home to run if they are interested.

 

Since ukay-ukay stores already have an edge over branded and designer clothes stores due to price, there is almost no need to market the store. However, ukay-ukay entrepreneurs also have to accept that Filipinos have already attached certain beliefs surrounding the ukay-ukay like issues on health and quality. There are simply Filipinos who are into ukay-ukay wares and Filipinos who will not even attempt to step into a store.

 

As for customers, the ukay-ukay is simply here to last unless calls for stricter policies are put in place. There is a law that says it is illegal to import second-hand goods in the Philippines.  However, there is no law as of yet that covers businesses trading second-hand goods, which some Filipinos still believe is a practical choice.

 

Ukay-ukay business basics

 

Pricing and return of investment

 

There is no doubt that ukay-ukay wares are way cheaper compared to items in malls and even surplus stores. But with low price tags, is there still a return of investment for the entrepreneur?

 

 

Ukay-ukay wares are sold in bales by traders. A bale may consist of anywhere from 500-1000 different articles of clothing, and may be sorted into specific kinds like women’s blouses, men’s shirts, kid’s wear, pants, jackets and others. The price of bales depends on the number of clothes each bale has or the quality of clothes they carry. Some bales of 1000pcs are sold at Php11,000-15,000, plus shipping price. At this rate, the investment is around Php11-15 per piece of clothing.

 

Basic ukay wares like shirts and blouses in Metro Manila are priced at an average of Php75. Clearance sales may see the prices drop by at most 50%. But even when sold at a discount, entrepreneurs can still profit from a sale because of the very low initial investment. Whether sold ‘fresh’ (within 3-5 days after the opening of the bale) or in a 3-for-100 bargain, the entrepreneur can still profit or expect a return of investment amounting to 2-4x the original cost per piece of clothing.

 

Pricing ukay wares definitely depends on an entrepreneur’s diskarte (business acumen) – how he or she deals with customers while balancing the flow of income and the disposal of stocks. Provided an entrepreneur knows how to use his or her diskarte to manipulate these factors, then return of investment can be maximised for each bale.

 

Location and competition

 

Like any business, how successful an ukay store is depends on its location. From a customer’s point of view, the more ukay-ukay stores in an area, the more convenient shopping is.

 

Entrepreneurs, however, need not worry so much about competition with similar shops as ukay-ukay clothes come in many types. Unlike designer clothing stores that compete with each other because of the brand or image they carry, ukay-ukay stores only need to compete with each other in terms of accessibility. The more accessible a store is, the more it will be visited by customers in the area.

 

The prime customers of ukay-ukay stores are nearby residents and commuters. Professionals and employees who are not in a particular rush to go home may suddenly want to go on a side trip to the ukay-ukay for a few minutes, especially on pay day.

 

These sudden visits by passersby can lead to sales of one or two articles of clothing. Multiply these instances with the volume of passersby and the profit can soar easily.

 

The chances an entrepreneur can give discounts for haggling customers can also increase his or her store’s appeal. Amenities like air conditioning for customers, existence of changing rooms, and having an organised system of stacking can also help a business win customers.

 

Where to get a supplier

 

Ukay-ukay suppliers abound the internet and are known by the close circle of entrepreneurs who are already into the business. To get a supplier, you can try looking for their advertisements online. But to know which suppliers are trustworthy, it’s best to deal with suppliers that are already well-known and have established a good reputation among ukay-ukay business owners. Pinoy Money Talk forum has a thread on ukay-ukay suppliers as well as feedback by the members.

 

If you don’t want to deal with a supplier, you can get your stocks from many ukay-ukay bagsakan (depots) like Bambang market in Manila where sellers in wholesale and retail can be found. Other entry points include Baguio, Cebu and Cagayan de Oro. However, acquiring goods yourself will entail additional time to scour and purchase items for your store.

 

What it takes to be an ukay-ukay entrepreneur

 

An ukay-ukay entrepreneur can easily open multiple stores if sales are good. To maximise the return of investment, however, the entrepreneur must be able to sell each and every article of clothing in the bale. Once an article of clothing has passed its ‘freshness’ threshold, then the entrepreneur must apply strategic pricing schemes like ‘buy 1 take 1’ or ‘3 for 100.’

 

Aside from pricing skills, an ukay-ukay business owner must also have the following characteristics to be able to keep the profits coming:

 

Creativity. The ukay owner must know how to convert old wares into something more profitable. There are some articles of clothing that simply aren’t sellable in the store, even if priced at Php1. A solution would be to make crafts items from them, like pillow cases. They can also be turned into rags for practical use at home. Owners can also collect and sell them in another branch or town.

 

Patience. The ukay owner must be patient enough to buy, sort through and price every piece of clothing in a bale. Bales can carry thousands of clothes at a time, and it will take a whole day to sort through these piles alone. The ukay business is a business that requires your whole, undivided attention – it is not a business for entrepreneurs who aren’t into people, fashion and who aren’t flexible enough to adjust in a volatile market.

 

 

Organised. Finally, the ukay owner must be organised him or herself to be able to juggle pricing, customer and cash flow at the same time. An entrepreneur’s sense of organisation also translates smoothly to the business – an important attribute since an ukay business needs to be organised for customers to search through and rummage for clothes easily.

 

How profitable an ukay-ukay business is nowadays basically falls down to the effort and traits of the owner. Without one of the attributes mentioned, it will be difficult to fit into the role of ukay-ukay business proprietor. But once an entrepreneur has adjusted to the demands of maintaining an ukay-ukay business, then profit will flow.

 

Have you ever tried opening an ukay business? What pros and cons can you give to budding ukay owners? Do you have any other suggestions for those who would like to try entering this business? Leave your comments and suggestions below!

 

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