As global brands embraced technology to directly reach consumers across Latin America, predictions for small corner stores were discouraging. Many anticipated that mom and pop stores would disappear, especially when the pandemic hit. Instead, technology delivered a boon by boosting the way these channels previously operated.
Since the pandemic, shoppers have flocked more to the small corner stores than supermarkets in Latin America, according to research firm Kantar. A 2022 report notes that supermarkets and traditional stores like bakeries grew their share by 20 percent from 2020 to 2022, but specialized and convenience stores, like corner stores, grew by 40 percent.
This growth may be spurred in part by smaller stores having access to and adopting digital tools from chatbots to WhatsApp. The technology is helping them gain more access to sales people, allowing them to order products for their shelves, and learn how to merchandise better — all by tapping into the same tech tools that some believed would harm their business. Brands are benefiting as well, by reaching smaller stores more directly and more frequently.
“Traditional stores represents the largest channel for fast moving consumer goods (FMCG) and plays a paramount role for shoppers in terms of proximity, which is becoming increasingly relevant for them,” says Gonzalo Montoya, LA Indirect Channel Capability Leader at Procter & Gamble. “Being available in traditional stores is essential to drive penetration and frequency and therefore, to grow our brands and categories.”
Small digital footsteps
Helen Córdova is the owner of Bodega Tovar in Lima, Peru. For over 40 years her family has run the convenience store, which provides goods from toilet paper to gardening tools. Her father, Alfredo Córdova, started the store, but during the pandemic he ran out of ideas on how to keep the business running. The shop wasn’t selling enough products, and suppliers had spaced their visits infrequently, just to pick up orders and make deliveries.
Helen got an idea. By using WhatsApp, she was able to communicate with both customers and sales people quickly and more frequently. With suppliers, she would message about her orders and check on the status of those items with clients she could let them know then these products would be in the store. The app doesn’t charge per message or call and so the cost was also negligible. And by adopting WhatsApp, Córdova says customers — and the store’s bottom line — grew.
“It was hard at the beginning to adapt,” says Córdova. “My dad comes from a different generation but I convinced him to start using technology, and that has made our store grow significantly.”
In 2021, one year after starting with WhatsApp, Córdova heard from a small fintech company ServiTienda, which offered her the use of compact point-of-sale (POS) terminal to process transactions and place orders with some of their major providers. The company’s only request, in exchange for the free trial, was that they have access to the data collected by their technology.
“This was a game changer for our store,” Córdova says. “We started having tighter control on our inventory, our best-selling products, accurate prices in real time and we could even identify our most valuable clients.”
Within two years of adding both WhatsApp and the POS terminals, Bodega Tovar expanded the number and kinds of products it had on its shelves, and started applying loyalty benefits to their returning clients.
Cordova’s story is similar to other corner shops across Latin America: The pandemic served as a catalyzer for the transition from analog processes to the use of technology within the enormous small corner store ecosystem in Latin America, according to Montoya.
“The stores slowly began to use WhatsApp and their smartphones more to find solutions for their businesses and finally opened the possibility of incorporating technology, from the most basic to complex apps,” says Montoya, who added he saw this shift across Latin America.
Beatríz Alcántara, another Latin American-based store manager, also started communicating with its suppliers at Mini Market Marle in Lima, Peru with apps that sales people helped set up in 2022.
“Now we are not making any of our orders in person, we are fully online with this process,” she says.
Today, Mini Market Marle places orders with providers from Coca-Cola to candy suppliers and Alcántara says the process of placing orders takes nearly half the time since she started using digital ordering options.
“Also we are very much in control with what we have and what products we need to place an order. This has impacted a lot in having our customers happy and choosing us,” she says.
Alcántara also appreciates the ability to review the prices of different products on a daily basis online, allowing her to monitor potential increases, and amend orders as needed.
“This way we can control our sales and prevent getting hit with unplanned rises like we were seeing before,” she says.
Embracing more technology
Some store owners who started with messaging apps as their first shy step towards digitalization are now going one step further by adopting electronic payments.
Alcántara and Córdova both allow customers to make electronic payments through Yape. The Peruvian fintech company is operated by Peru’s main credit bank, BCP Banco de Crédito del Perú, and allows people to send and receive money instantly from their phones much the same way that Zelle and CashApp works.
“Yape is helping to bring a lot of people and businesses to the banking system, pulling them away from informality, a huge challenge for the region,” Montoya says.
According to CrediCorp Capital, there are more than 12,000 Yape users in Peru, making more than 200 million transactions per month.
Technology in Latin America, like Yape, is helping the region with one of its biggest financial challenges: shifting the cash-only economy to increase the use of its bank system, an important move to keep track of businesses and people’s money and to increase the tax payment participation – currently at an average of 21 percent throughout the region.
Before the pandemic the number of people using cash for most commercial transactions was 45% across the region. Three years later the number plummeted to only 21%, according to recent research by Americas Market Intelligence (AMI) and Mastercard.
“In most parts of Latin America the flux of money is not digital and they are still paying most of their suppliers cash, and receiving most of their payments in cash,” Montoya says. “I think this is the next natural step.”
Montoya says that currently most of the technology used among small corner stores in Latin America are between owners and suppliers. While an occasional shop, like the one run by Alcántara, allows customers to pay with an app like Yape, the vast majority still require shoppers pay in cash, says Montoya. But he believes more stores will start to allow this customers to pay for their orders through digital apps too.
“This would increase their sales and the number of transactions to another level,” he says. “Currently they place the order through the app, but the payment is still made in cash person to person. This will change the game in Latin America.”
The challenges of introducing technology into Latin America’s retail channels remain. But store owners like Córdova and Alcántara are driving a technology revolution that could soon bring even more economical development to the region.