Corner Stores Are the New Darlings of the Global Tech Industry
Corner stores don’t look like much. Maybe the one nearest to you has dusty shelves lined with bags of chips and cookies, and the cashier sitting next to the cigarettes and mini–shampoo bottles only takes cash. In some places, these mom-and-pop shops are simple roadside stalls or kiosks. They have largely operated 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 miss the vital role they play in local communities—and the global economy. In the developing world, where Western-style grocery stores aren’t common, many people rely on them for the bulk of their food and other household staples. In India, these kiranasaccount for more than 70 percent of all consumer purchases. In Indonesia, almost 80 percent of groceries are bought at traditional warungs. Overall, the global corner-store market is worth at least $900 billion.
So it’s no wonder that when the tech industry looks at these shops, it sees dollar signs. Over the past few years, dozens of start-ups flush with more than $1 billion from investors have sprung up to turn mom-and-pop stores into digital retailers and mini–tech hubs. In Egypt, merchants can now restock their shelves using an app; in Nigeria, shops now function as pseudo-banks; and in China, consumers can now pick up online grocery orders from corner stores. Major corporations and even Jeff Bezos are in on the craze—the Amazon founder recently invested in Ula, an Indonesian start-up that has signed up more than 70,000 retailers to its inventory-ordering platform.
Millions of mom-and-pop shops are already using some form of technology from these start-ups, but the digital transformation of the corner-store industry has only just begun. If it goes well—still a big if—independent stores in the global South may be able to forge a different future for themselves than in the West: Instead of getting destroyed by tech companies, what if they can learn to coexist with them?
The earliest start-ups designed to work with corner stores popped up a few years ago, but this market, like so many others, really boomed when the pandemic hit. Lockdowns forced people around the world to start shopping for groceries and packaged goods online—items they used to get at their local corner stores. Tech companies seized the opportunity, offering apps that allowed them to take e-commerce orders, fill their inventory with cheaper products, and make additional income through services like package delivery.
While the tech investment in corner stores is happening everywhere, much of the money has flowed to South and Southeast Asia, where these shops 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, the managing director of Sequoia Capital India, a venture-capital firm that has invested in five corner-store start-ups, including ShopUp, which runs a digital-commerce platform for shops in Bangladesh. In September, ShopUp announced 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 how common they are. Instead of attempting to replicate the infrastructure and community knowledge that these shops have, why not piggyback off of them? Their proximity to people’s homes already makes them well positioned to help remedy the logistical challenges that tech companies face, such as figuring out how to quickly get packages from a warehouse all the way to a customer’s doorstep. And because smartphones and 4G connections are becoming more widespread even in the developing world, start-ups are banking on the notion that it’s possible to get these old-fashioned shops to adopt new apps and other digital systems.
Some of these partnerships look a little like Uber and DoorDash: The shopkeepers 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 functions kind of like a mix between Costco and Nextdoor. Neighbors can place bulk grocery orders on the messaging app WeChat, which are then delivered to the owner of a corner store. In exchange for a cut of the sales—say a few hundred dollars a month—the shop is responsible for distributing the food and being the first point of contact for any mistakes or issues. Meanwhile, in Nigeria, where there are only about 8,000 bank branches for more than 200 million people, some shops are increasing foot traffic and making extra income by doubling as finance hubs. The setup, called agent banking, has surged during the pandemic and allows consumers to make withdrawals or send remittances at local stores using a device that’s similar to a credit-card reader.
Some of the world’s largest companies want in too. Amazon has partnered with thousands of corner stores in India to build a network of mini–fulfillment centers. More than 20,000 small shops have signed up for the “I Have Space” program, which puts them in charge of making nearby Amazon deliveries or facilitating pickups. In South America, Coca-Cola launched a platform similar to Uber Eats called Wabi, which allows stores to accept and deliver e-commerce orders from customers in the surrounding neighborhood.
And because of how traditional these mom-and-pop stores can be, lots of companies think they can turn a profit by simply digitizing their most basic operations. In Morocco, the start-up Chari has built 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, the CEO and a 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 start-ups in the industry, Chari also has an e-commerce platform that shops can use to order inventory online, instead of calling suppliers and then paying in cash when the goods arrive.
Although the push to modernize corner stores is picking up, it’s not as if all of them are on the verge of going digital tomorrow. Walmart, one of the biggest players in India, so far is reportedly working with just 1.6 million of the estimated 13 million small shops in the country. Many mom-and-pops might have good reasons to be hesitant to change, says Lindsay Lehr, the payments practice director at Americas Market Intelligence, a market-research firm. Some do sales under the table, and using e-commerce could make it tougher to skirt taxes. Even if they do report their income, many shop owners find that cash remains the most convenient payment option. Most important, tech companies still have to prove that what they’re offering is cost-effective and better than the old way of doing things. “It’s a segment that’s really resistant to digitization in many ways, for many reasons,” Lehr told me.
Even corner stores that see the benefits might struggle to navigate new technology. Belkhayat told me that when shopkeepers using Chari are ready to buy, they frequently call the company instead of just ordering online as the company intended. “We have a team in the back office basically listening to the WhatsApp calls and making the orders on behalf of the clients,” he said.
One risk is that the infusion of tech money winds up making these independent businesses look and feel a lot more like chains. “The more you become digital, the more connected you are to the internet,” Lehr said. “The more connected you are to global trends, the more pressure you feel to do certain things.” The Indian start-up Jumbotail allows shopkeepers the opportunity to open one of the company’s branded J24 convenience stores, and S. Karthik Venkateswaran, Jumbotail’s co-founder and CEO, told me he envisions a world where consumers pass four different J24 stores throughout the course of their day. “Ubiquity is extremely important to us,” he said, but added that owners can still customize many aspects of their operations. “Every single store is different.”
But the other possibility is that by partnering with tech companies, these mom-and-pop shops might avoid the fate of getting squashed by giants like Walmart and Amazon, which can afford to sell the same goods at lower prices. To a certain degree, that’s already happened in the U.S., where Americans have been lured away from small businesses by the conveniences of Amazon Prime. “We would love to have Morocco and developing countries have a different fate,” Belkhayat said.
In the global South, millions of these beloved stores could one day end up part of a new digital economy that looks distinctly different from that of the West. Instead of transitioning to big-box retailers, communities will continue relying on the same shops they have for generations, but they’ll have evolved into futuristic outposts that double as tiny warehouses, banks, and grocery-delivery hubs. At least for now, the global tech industry has landed on the oldest trick in the book: If you can’t beat ’em, join ’em.
Source: The Atlantic