While the research that Dr Christopher Mejia and I are conducting has not yet fully concluded, we believe that the family-owned and operated nanostores that are so common across most of the developing world are here to stay over the next decade. In megacities such as Mexico City and Bogota, data we have obtained and analyzed show that over the past decade the number of nanostores has increased rather than declined. In China, the percent of retail sales that goes through the independent channel has increased. And in many countries (not only developing), supermarkets and hypermarkets are having difficulty retaining market share or even surviving.
However, many opportunities abound for new technology to enter into this market, leveraging the high density of stores that allows for convenient proximity shopping with the efficiency, resources and assortment that is present online. Examples of such platforms have been started by companies like BeeQuick in Beijing, using a virtual network of thousands of nanostores to facilitate rapid home delivery of convenience products. Another, in this case already very successful company in Go-Jekin Indonesia, which links thousands of nanostores and other nano-services such as massage and food with a platform of motorcycles to do delivery in Jakarta and other cities.
It is then sad to see that the reputed magazine El Financero reports (“Corner stores could disappear”, 25 September 2016) so poorly about the actual developments. They interview the intiator behind the Tecno Tienda: a government supported initiative to bring technology into nanostores. As mentioned above: huge opportunities abound. However, the magazine brings this as a means to save the channel. They cite a repeating myth (which I have heard on many occasions in Mexico but nobody has been able to show me the data for) that for every Oxxo opened, 15 nanostores close. Let’s call this the (presumed) Oxxo effect. Oxxo is a successful convenience store chain in Mexico that has grown rapidly operating on a franchise model. I am not sure of the exact number of Oxxos opened in Mexico City, but it well over 1000 over the past years. If the Oxxo-effect is true, this would imply that in Mexico City, in the past few years, at least 15,000 stores would have been closed. However, the data from the national statistics agency INEGI suggests that the number has actually grown.
There is a strong misperception amongst many business people in Latin America about the interaction between the channels. The success of the Oxxos barely goes at the expense of the nanostores. It is at the expenses of other channels, in particular the supermarkets. The single exception might be the rich and developed areas of Mexico City, such as the Polanco neighbourhood. Further, I am truely convinced that technology could bring a revolution to the nanostores. We should learn from a successful business model like Go-Jek and from struggling initiatives like Frogtek
When our work is completed, I will update this post with our graphs and results. However, if a reputed magazine such as El Financero brings forward apparent false insights, I need to raise this flag.