Most unlikely partners of tech companies: the corner stores

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Convenience stores don’t look like much. Maybe the one closest to you has dusty shelves full of bags of crisps and cookies, and the cashier sitting next to the cigarettes and mini shampoo bottles only takes cash. In some places, these family-owned shops are simple roadside stalls or kiosks. They’ve worked much the same way for decades: many still order their products over the phone and manage their books on paper.

These stores are so mundane that it can be easy to overlook the vital role they play in local communities and the global economy. In developing countries, where Western-style grocery stores are not common, many people depend on them for most of their food and other basic items. In India, these Kiranas account for over 70 percent of all consumer purchases. In Indonesia, nearly 80 percent of groceries are purchased from traditional stores warung. Globally, the global convenience store market is worth at least $ 900 billion.

So it’s no wonder that when the tech industry looks at these stores, they see dollar signs. In recent years, dozens of start-ups with over $ 1 billion in investors have sprung up to transform family-owned stores into digital retailers and mini-tech hubs. In Egypt, merchants can now restock their shelves using an app; in Nigeria, stores now operate as pseudo-banks; and in China, consumers can now pick up their grocery orders online at convenience stores. Big companies and even Jeff Bezos are in on the buzz – the Amazon founder recently invested in Ula, an Indonesian startup that has listed more than 70,000 retailers on his inventory ordering platform.

Millions of mom-and-pop stores are already using some form of technology from these startups, but the digital transformation of the convenience store industry is just beginning. If it goes well, another big one if– independent stores in southern countries could forge a different future from that of the West: instead of being destroyed by technology companies, and if they could learn to coexist with them?

The first startups designed to work with convenience stores appeared a few years ago, but this market, like so many others, really exploded when the pandemic struck. The closures have forced people around the world to start shopping online and buying packaged goods, items they used to get at their local convenience stores. Tech companies have seized the opportunity by offering apps that allow them to take e-commerce orders, fill their inventory with cheaper products, and generate additional income through services such as parcel delivery.

While technological investment in convenience stores is happening everywhere, much of the money has flowed into South and Southeast Asia, where these stores are particularly dominant. “The region has tens of millions of [small and medium-size enterprises] that form the backbone of the economy, ”says Abheek Anand, Managing Director of Sequoia Capital India, a venture capital firm that has invested in five convenience store start-ups, including ShopUp, which operates a platform. form of digital commerce for stores. in Bangladesh. In September, ShopUp announced that it had raised $ 75 million, the largest funding round for any start-up in Bangladesh ever.

Tech companies are so interested in corner stores precisely because of their frequency. Instead of trying to replicate the infrastructure and community knowledge that these stores have, why not use it? Their proximity to people’s homes already makes them well positioned to help tackle the logistical challenges that technology companies face, such as figuring out how to get packages from a warehouse to a customer’s door quickly. And because smartphones and 4G connections are more and more widespread even in developing countries, start-ups are banking on the idea that it is possible to make these old-fashioned stores adopt new applications and other digital systems.

Some of these partnerships are a bit like Uber and DoorDash: merchants become gig workers who perform tasks for a fee. In China, food delivery companies have spent hundreds of millions of dollars on a business model called community group buying, which works much like a cross between Costco and Nextdoor. Neighbors can place wholesale grocery orders on the WeChat messaging app, which are then delivered to the owner of a convenience store. In return for reduced sales, say a few hundred dollars a month, the store is responsible for distributing the food and being the first point of contact if there is any error or problem. Meanwhile, in Nigeria, where there are only around 8,000 bank branches for more than 200 million people, some stores are increasing foot traffic and generating additional income by doubling financial centers. The setup, called a bank agent, has grown during the pandemic and allows consumers to make withdrawals or send funds to local stores using a device similar to a credit card reader.

Some of the biggest companies in the world also want to participate. Amazon has partnered with thousands of convenience stores in India to create a network of mini-fulfillment centers. More than 20,000 small stores have signed up for the “I Have Space” program, which instructs them to make nearby Amazon deliveries or facilitate pickups. In South America, Coca-Cola launched a Uber Eats-like platform called Wabi, which allows stores to accept and deliver e-commerce orders from customers in the surrounding neighborhood.

And because of the traditional nature of these family-owned stores, many businesses believe they can make a profit just by digitizing their most basic operations. In Morocco, start-up Chari has created a simple ledger app that digitizes the paper systems that corner stores have used to manage customer tabs for decades, if not centuries. Ismael Belkhayat, CEO and co-founder of Chari, told me that more than 50,000 stores have signed up for the service, which automatically reminds people to pay their balances on time. And like other startups in the industry, Chari also has an e-commerce platform that stores can use to order inventory online, instead of calling vendors and paying cash to the store. arrival of goods.

While the trend to modernize corner stores is accelerating, it’s not like all of them are about to go digital tomorrow. Walmart, one of the biggest players in India, is said to work with just 1.6 million of the estimated 13 million small stores in the country so far. Many moms and dads might have good reason to be reluctant to change, says Lindsay Lehr, director of payment practices at Americas Market Intelligence, a market research firm. Some are black sellers, and the use of e-commerce may make it more difficult to avoid taxes. Even though they report their income, many merchants find cash to be the most convenient payment option. More importantly, tech companies have yet to prove that what they offer is profitable and better than the old way of doing things. “It’s a segment that is really resistant to digitization in a lot of ways, for a lot of reasons,” Lehr told me.

Even corner stores that see the benefits might find it difficult to navigate new technology. Belkhayat told me that when traders using Chari are ready to buy, they to call the company instead of just ordering online as the company intended. “We have a team in the back office that basically listens to WhatsApp calls and places orders on behalf of customers,” he said.

One of the risks is that the injection of tech money ends up making these independent companies look and feel a lot more like chains. “The more digital you become, the more connected you are to the Internet,” said Lehr. “The more connected you are to global trends, the more pressure you feel to do certain things.” Indian start-up Jumbotail allows merchants to open one of the company’s J24 convenience stores, and S. Karthik Venkateswaran, co-founder and CEO of Jumbotail, told me he envisions a world where consumers walk past four different J24 stores along the way. of their day. “Ubiquity is extremely important to us,” he said, but added that owners can still customize many aspects of their operations. “Every store is different.”

But the other possibility is that by partnering with tech companies, these family-owned stores could avoid the fate of being crushed by giants like Walmart and Amazon, who can afford to sell the same products at lower prices. To some extent, this has happened in the United States before, where Americans have been drawn away from small businesses by the amenities of Amazon Prime. “We would like Morocco and developing countries to have a different fate,” Belkhayat said.

Across the South, millions of these beloved stores may one day be part of a new digital economy that looks markedly different from that of the West. Instead of moving to big box retailers, communities will continue to rely on the same stores that they have had for generations, but they will have become futuristic outposts that will also serve as tiny warehouses, banks and hubs. grocery delivery. At least for now, the global tech industry has landed on the oldest trick in the book: If you can’t beat them, join them.

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