Why startups are courting convenience stores from Mexico to Indonesia
Convenience stores, especially in emerging markets, represent a treasure trove of opportunities for startups - big tech even wants a slice.
Let’s get some definitions down first. In this article, convenience stores will refer to small, locally owned stores that sell daily necessities and a few small food items, which can be categorized as Fast Moving Consumer Goods (FMCG).
These stores have different names around the world including bodega (USA), warung (Indonesia) or kirana (India). This article won’t talk about franchised supermarket chains or SMEs as a whole. It’ll only talk about convenience stores and why startups are dying to digitize them.
The sheer size, ubiquity, and longevity of the convenience store market are often overlooked. Today, it is estimated that the global convenience store is worth $900 billion, with a heavy footprint in densely populated emerging markets such as Southeast Asia.
These stores are often deeply engrained in the local community, with shop-owners knowing repeat customers by name and fostering a close relationship with them. That personalized relationship with customers is often what protects these stores from stiff competition. Customers are also loyal - in LATAM for example, 65% of groceries are purchased at convenience stores. In Indonesia, so-called warungs contribute a GDP 4 times higher than the country’s e-commerce channels.
Interestingly, the global convenience store market has been extremely resistant to the rise of e-commerce. Indeed, FMCG products have never really been conquered by e-commerce, as people prefer the accessibility, human connection, and overall ease of shopping at their local convenience store. Some tech-backed ventures aimed at somewhat disrupting the market such as Stockwell or Amazon Go have failed to live up to expectations.