Over the past decade, large retailers have made only modest progress in penetrating low-income segments in Latin America. Part of the reason is that multinational corporations, especially from developed countries, have earned enough delivering products to, and developing retailing formats targeted at, higher-income customers to be able to take their eyes off the potential of consumers with limited incomes. Moreover, retailers have underestimated the collective economic clout of people of modest, or even subsistence, means.
As Latin America makes progress in solving its economic and social problems, companies seeking growth and profit in the region’s consumer-goods markets will have to refocus on this vast and growing group of lower-class and lower-to-middle-class consumers we call emerging consumers. Indeed, this was a definitive finding of a Booz Allen Hamilton study of consumer behavior and supermarket retail trade trends in six Latin American countries conducted in 2003 for the Coca-Cola Retailing Research Council–Latin America. (See “Research Methodology,” at the end of this article.)
Companies trying to export modern supermarket and hypermarket models from developed countries to Latin America face the toughest challenges, not the least of which is surprisingly strong competition from small-scale retailers — the shops, street markets, and small independent supermarkets that are an integral part of the Latin culture. Through the lens of the modern retailer, Latin America’s traditional retailers appear to be inferior; their small stores seem dirty and cluttered and possess limited stock. It is assumed their proprietors rely on informal, even illegal, operating practices, such as the evasion of taxes and labor laws, to prop up their otherwise unproductive business model. Their customers are seen as cash-strapped, unsophisticated shoppers.
Our study found these assumptions regarding low-income Latin consumers and the viability of Latin America’s small-scale retail models to be faulty. Although large supermarkets have made significant inroads in the region over the past decade, traditional retailers are holding their ground. Small retailers not only are meeting the needs of emerging consumers; in many ways, they are serving these consumers better than modern retailers do. Furthermore, informal business practices are not the main driver of the traditional stores’ competitive strength.
To reach these conclusions, we analyzed not only what and where emerging consumers are buying, but also why they make their choices. In the process, we discovered significant myths about the mind-set and behavior of emerging consumers, and lessons that large companies producing and distributing consumer goods for this region can learn from the success of the small-scale retail trade.
Selling to emerging consumers is no small challenge for major consumer-goods retailers and manufacturers, especially those unfamiliar with Latin America’s distinctive retail terrain. To accelerate their penetration of these markets, and to sustain profits over time, these companies must offer emerging consumers different value propositions, modify their distribution and marketing strategies, and achieve global scale and local focus. They must do all this without compromising the value and profitability of their offerings for traditional customers. And, when possible, they must seek to decrease their costs. Until companies better understand the needs of emerging consumers and adapt their business models to serve them more efficiently and effectively, their growth will be limited.
The 1990s global economic boom and the economic stabilization of many Latin American countries was the perfect springboard for modernizing the region’s retail sector. During this period, multinational consumer-goods companies and local supermarket chains invested aggressively in retail. This investment, combined with rising per capita incomes and a general improvement in the quality of consumer goods, helped fuel the expansion of large chain supermarkets through the mid-1990s. Today, depending on the country, approximately 45 to 60 percent of the retail sales of such packaged goods as food, beverages, personal care items, and cleaning products are concentrated in supermarkets.
Many believed small retail players in Latin America would be swept away by the sector’s consolidation and the rapid entry of new hypermarkets and supermarkets, as was the case in the U.S. and Europe, where small retailers have retained only 10 to 20 percent of the consumer packaged-goods market as large retailers have grown. So far, this has not occurred in Latin America. Small-scale independent supermarkets and traditional stores together still account for between 45 and 61 percent of consumer-goods retailing in Latin American countries. (See Exhibit 1.)
Despite the growth of modern supermarkets, five basic service models remain common to all Latin American countries:
Traditional stores tend to be small (about 25 to 50 square meters) and offer mostly counter service.
Small supermarkets are self-service businesses, usually with no more than four checkout lanes. Stores range from small outlets staffed by a sole proprietor and with only one cash register, to bustling independent supermarkets that stock a wide variety of products and have as many as five or six checkout lanes.
Street vendors and open-air markets don’t have a permanent location; many are mounted on carts that serve as easily moved stalls. Some vendors set up shop in the same location every day. Others operate in multiple locations that vary by the day of the week.
Category specialists, such as butchers, bakers, and greengrocers, offer a limited selection of fresh foods. These stores usually have counter service. (There are some exceptions, such as Brazil’s self-service fruit and vegetable stores.)
Convenience outlets use kiosks that are less than 10 square meters in size. These outlets sell “fast-moving” goods, primarily candy, gum, tobacco, and general merchandise, such as pens, notebooks, and newspapers.
Even though Latin America’s emerging consumers have not yet migrated in large numbers from these traditional outlets to modern supermarkets, competition is now compelling larger retailers to try to win more customers from the emerging segment. Competition in the consumer-goods retailing and manufacturing sector is also heating up as global multinationals and Latin America’s “multilatinas” (large companies headquartered in Latin America and serving markets throughout the region) contest one another for market share. As the battle between modernity and tradition heightens, multinationals and multilatinas alike must peel away six fictions that prevail in the six Latin American countries we studied.
Myth #1: Low-income consumers spend little on material goods.
Truth: Although these consumers are poor, proportionately they spend more of their income on consumer goods than those in wealthier segments.
Emerging consumers spend from 50 to 75 percent of their disposable income on consumer products. For people living at the subsistence level, that share of income is often 100 percent. Middle- to upper-income consumers allocate as much as 35 percent of their income to these goods.
There is much severe poverty in Latin America, but a significant portion of low- and lower-middle-income households have running water, electricity, and such basic appliances as refrigerators, televisions, and radios. In countries such as Mexico and Costa Rica, a considerable number of low- and lower-middle-income urban households also have washing machines and VCRs, and access to cars. All of this influences these households’ demand for consumer goods, and consumers’ purchasing behavior.
In many emerging consumer households, “stay at home” mothers make most of the purchases. We found that the self-esteem of these women was significantly tied to how they managed their spending on consumer goods for their families. For many mothers, the purchase of consumer products is the mechanism by which they fulfill their overlapping roles of “wife,” “caring mother,” “educator,” and “household manager,” and also is how they satisfy their own personal needs.
Myth #2: Low-income and subsistence-level consumers’ needs are simple.
Truth: These consumers buy premium-priced branded products and are sophisticated shoppers.
It’s natural to surmise that low-income consumers would buy only the lowest-cost products and prefer no-frills stores or traditional street markets. But, although their shopping needs and tastes can be described as basic, they’re not simplistic. Our research showed that a typical shopping basket for this income tier is filled with a variety of household staples, including basic foodstuffs (rice and pasta), perishables (vegetables and fruits), a few packaged food and beverage items, and cleaning and personal care products.
And emerging consumers are willing to pay more for the leading and intermediate brands. Their desire to buy brands is prevalent not only in the staples category, but also in secondary “aspirational” products (shampoos, cold cuts, beer, dishwasher detergent) and what are considered luxury goods in Latin America (condensed milk, canned tuna, cookies, furniture polish, makeup).
The impulse to buy brands is not a lemminglike response to advertising campaigns, nor are emerging consumers carefree about their choices. Participants in our focus groups expressed a strong desire to buy branded products of all kinds, although affordability was always a concern.
As a whole, emerging consumers aspire to buy brands (especially leading brands) regardless of price, because they embody the quality and status that inspire confidence in the products and in themselves. They would rather pay more for quality than risk a product failure. This caution makes sense since the financial loss from an underperforming product is greater for people with limited incomes.
Consumers in our study expressed skepticism about the quality of “value branded” products with lower price points; as some remarked, “Lo barato sale caro” or “What is cheap ends up being expensive.” But acceptance of lower-priced value brands is growing in some countries. In Brazil and Argentina, we found emerging consumers were most open to trying value brands, especially branded cleaning products. Economic necessity and endorsements from family and friends strongly influence a person’s decision to buy a value brand.
Our study suggests that emerging consumers are more loyal in their purchases of branded products in general than they are to specific brand names. They are inclined to try new products and are especially responsive to good promotions. But in many product categories, they are comfortable making substitutions only among a small set of brands. Generally, they are not big experimenters with new products and unfamiliar brands.
The strongest brand loyalty among emerging consumers is reserved for staples, such as rice and cooking oil. Brand loyalty is also high for secondary categories like soft drinks, or products where emotions come into play. For example, choosing the baby food with the highest nutritional value and safety standards is a reflection of a family caregiver’s concern about her responsibilities; good choices contribute to self-esteem. This is consistent with marketing research that shows that consumers’ “level of involvement” with a category strongly correlates with their willingness to stretch their budget to buy what they perceive as the better product.
Myth #3: Emerging consumers are overwhelmingly attracted to the lowest shelf prices.
Truth: Emerging consumers are sensible shoppers who take into account many factors other than price in calculating their shopping costs.
Emerging consumers show price sensitivity in a variety of ways. They meticulously track price benchmarks, show considerable self-restraint as shoppers, and are reluctant to use credit to pay for consumables. When economic conditions deteriorate, emerging consumers often react quickly by scaling back spending on higher-priced goods.
But price sensitivity goes beyond responses to the shelf prices of individual products. Emerging consumers mentally add in all the costs associated with a shopping excursion. This “total cost of purchasing,” of which the shelf price of individual products is one component, also includes the costs of transportation (paying for a bus) and child care, the burden of carrying heavy packages, and time (getting to and from the store, or to a lesser degree, standing in line).
Because of their limited and unstable cash flow, low-income consumers tend to shop daily and make small purchases. Such daily shopping trips don’t justify going long distances to a store. Our research showed that low-income consumers want to be able to walk no more than a few blocks from their homes to do their shopping, and they don’t want to take public transportation. To them, round-trip bus fare or a short taxi ride is a significant expense. A retailer located more than a five-minute walk or three to four bus stops away from a customer’s immediate neighborhood would have to discount its products 25 to 55 percent in order for this customer to justify paying for transportation to shop in the store.
Most low-income consumers living in urban areas can find a number of traditional over-the-counter shops, small independent supermarkets, and open-air markets close to their homes — what are sometimes referred to as “up and down the street” retail formats. For this consumer, shopping in a store up or down the street significantly lowers total purchasing cost.
The “lowest cost” myth is also refuted when it comes to choosing the size of an item. Budget-conscious consumers in developed markets like to buy oversized packages, because they have a lower per-unit cost. But in developing markets, emerging consumers tend to buy products in smaller sizes, even though the per-unit cost is higher, because they are constrained by smaller incomes and living spaces. According to our research, shelf prices in traditional and self-service stores are 5 to 20 percent higher than those in large supermarkets.
Myth #4: If they did not face budgetary constraints, emerging consumers would prefer modern supermarkets.
Truth: Emerging consumers are satisfied with traditional retailers, and don’t necessarily aspire to shop in modern supermarkets.
It’s easy to think of emerging consumers as “junior” versions of middle- and high-income consumers. The assumption is they will automatically want to shop in a modern supermarket once their incomes rise, especially if they can afford to buy a car to drive there.
In reality, emerging consumer segments we observed, especially in Colombia, Mexico, and Argentina, do not buy in supermarkets. In Brazil, a moderate number of consumers shop in stores larger than traditional markets, but they still prefer independent stores, or small neighborhood chains with no more than four or five stores, over larger retail companies. In the city of São Paulo, Brazil, ferias, which are street markets licensed by city government, sell 70 percent of the overall supply of fresh food (mostly produce, beef, fish, and poultry). In Chile and Costa Rica, more emerging consumers told us they shop in supermarkets, but they also noted that large supermarkets are located close by their homes.
Product variety could attract emerging consumers to supermarkets, but it won’t necessarily make them buyers. Sometimes shopping is simply a form of entertainment. Customers to whom we spoke described how they like to browse among personal care and general merchandise items found in larger stores, but they don’t buy the products.
Sometimes too much variety can evoke negative feelings among emerging consumers; they worry they may feel tempted to buy more than they need. Too many choices may make shopping feel time consuming, or raise feelings of inferiority if a consumer sees too many items she can’t afford. Emerging consumers value product assortments that respond to their desire for better-performing products, certain brands, economical alternatives, and emotional validation. These are decidedly more abstract retailing concepts than that of simply filling a store with thousands of stock keeping units (SKUs) and running price promotions.
Emerging consumers don’t see as “high quality” the uniformly shaped, brightly colored, and unblemished fruits and vegetables one finds in large supermarkets. In fact, these consumers prefer produce sold by street retailers to the so-called high-grade produce found in supermarkets. In our study, people said they view the stocking and ripening process employed at large supermarkets as unnatural and complained that perfectly waxed apples and bright red, unblemished tomatoes not only are artificial, but taste bad. In contrast, they described products sold by vendors on the street or in open-air markets as “wholesome” and “farm fresh.” Also, the prices for fresh produce sold in open-air market formats can be substantially lower than those in chain stores, because vendors often reduce prices throughout the day.
Generally, focus group participants said supermarkets are too impersonal. Some complained of feeling embarrassed or being mistreated when they found themselves short of cash at the register. Others described their treatment in large chain stores as “professional” but not “caring” or “personal” — the words used to describe their experience with small-scale retailers. Emerging consumers said a personal relationship with the proprietor and staff of the local store bolstered their self-esteem and well-being. In large markets, some consumers said they encountered staff who were impatient with them when they asked to have items weighed; some felt they were being overly scrutinized by security personnel. Some said they got the cold shoulder from other customers in the store. In the small, local shop, people said there was no problem in exchanging items, whereas the formality of the exchange process in large stores was intimidating.
Myth #5: Emerging consumers are highly dependent on credit.
Truth: Emerging consumers use credit to extend their purchasing power.
Generally, people in the low-income segments try not to spend beyond their means, and they pay cash as one way to control their expenditures. Credit is viewed as more appropriate for major purchases (e.g., appliances, school uniforms) than for funding day-to-day consumables.
That said, emerging consumers frequently go to the checkout counter only to find out they are just short of the amount needed to pay for even a small purchase. To make up this small-change gap, they rely on a “virtual wallet” service often offered by neighborhood retailers. The virtual wallet is an informal form of short-term credit for very small amounts of money. Local shopkeepers (but not chain markets) generally offer this service to their regular customers. Under fiado, a type of virtual wallet offered by small-scale retailers throughout Latin America, the shop owner records in a notebook the amount of the purchase under the customer’s name. No cash is exchanged. The customer returns later to pay down the balance, or retire the debt. There are no interest charges, but when customers take too long to pay, or default on their debt, they’re likely to have their names (and the amount in arrears) posted on a sign in the neighborhood. Social incentives are strong for the system to work for both parties.
Technically speaking, the virtual wallet is short-term credit, but it is perceived as an extension of the personal relationship between the consumer and the shopkeeper, rather than as a transaction or service. It helps customers avoid embarrassment if they are unexpectedly short of cash. And it enables parents to send their children to make daily purchases with the smallest amount of money possible, which is considered a good way to control impulse spending on candy and snacks.
The type of credit used by emerging consumers varies from country to country. Checks are generally more common in Brazil than in other countries, and some emerging consumers do have checking accounts. Chains and some small independent supermarkets will allow customers to post-date checks, thereby granting short-term credit. Consumers who participated in our focus groups very rarely used credit cards.
Myth #6: Emerging consumers all belong to one segment, “the popular class.”
Truth: There are many meaningful subsegments of emerging consumers. Their differences, based on lifestyle and attitudes, have a significant impact on shopping behavior.
In developed markets, “yuppie,” “buppie,” “DINK,” and “BOBO” whimsically refer to recognized middle- and upper-income sociodemographic segments. Low-income consumers are typically lumped into the “blue-collar” or “working-class” segments — and in Latin America, the “popular class” — as if there were no notable differences among them. This is the wrong way to evaluate emerging consumer characteristics. Even though emerging consumers may have a relatively homogenous profile in terms of demographic and socioeconomic variables, their behaviors can be differentiated by psychographic variables that range between two extremes: practicality-control-traditionalism and emotion-impulse-innovation.
Some emerging consumers have incomes that enable them to stock goods at home and experiment more with different products and stores. Others focus on basic needs, and tend to stick with familiar brands and stores. When an economic crisis hits, newly constrained consumers struggle to determine what they can do without, while the “structurally” poor are always struggling to buy necessities.
To understand the sources of small-scale retailers’ collective success, achieved despite the incursion of large chains, we developed and adapted standard marketing frameworks for evaluating their value propositions and business models. Classic marketing value drivers such as place, product assortment, price versus value, people, and services were examined along with selected ratios from the Strategic Resource Model, a long-standing method for evaluating operating performance in the retail industry.
The results of our analysis were consistent with the six myths we uncovered in focus groups and secondary research. They reveal much about why and how small retailers have retained a strong market share.
First, most small retailers have a stronger value proposition for emerging consumers than do current supermarket competitors.
Location is one of the compelling value propositions small retailers offer emerging consumers, especially for daily shoppers. But other factors keep emerging consumers loyal to their local shopkeeper. These consumers don’t seem to care much about the modern layout and amenities of the supermarket; in fact, they may see the organized, pristine environment as a cost retailers pass on to them. Meanwhile, they aren’t concerned by the typical small store’s randomly shelved merchandise, out-of-date promotional messages, narrow aisles, and dim lighting. What emerging consumers do care about is hygiene, and most sole proprietors we talked to were careful to provide it. As one pulpería owner in Costa Rica told us: “I know that my customers value a clean store and that they measure cleanliness just like they do at home, by looking at the floor.” (He put in a tile floor that keeps its shine without wax and is easy to clean at a low cost.)
Traditional stores and self-service retailers know how to optimize the mix of products for their micromarket, offering only the main categories, brands, and sizes their unique customer base demands. A traditional or self-service store’s typical assortment includes fresh foods, drinks, basic dry goods, and a limited selection of cleaning products, personal care items, and luxury foods like canned fish, deli meats, cookies, and condiments. In most countries, leading brands dominate this assortment, especially in the traditional stores, where approximately 80 percent or more of the SKUs are first-tier brands, compared with 60 to 70 percent of the SKUs in chain stores (which stock comparably more value brands and private-label products).
Additionally, small-scale retailers offer a high proportion of smaller sizes and “fractionated” single-unit packaging. In many countries, the smallest size of powdered laundry detergent available in large chain supermarkets is 500 grams. Small retailers commonly carry sizes as small as 150 or 250 grams.
In categories that matter greatly, such as fresh foods, street vendors trump supermarkets by offering better prices because they can buy direct from farmers, and by lowering prices over the course of the day. Emerging consumers also appreciate that the open-air retailers offer several grades of fresh products, at different stages of maturity, whereas supermarkets offer only the highest grade.
Local shopkeepers also benefit from their personal touch. We interviewed many shopkeepers who claimed to recognize, even know by name, more than 60 percent of their customer base. Most said they shared neighborhood news with their customers and many made it a point to greet and talk with nearly every customer who entered the shop, inquiring after their families.
Even if small-scale retailers’ services are minimal and their merchandising techniques simple when compared to large chain supermarkets, they’re appropriate for the emerging consumer.
Second, small-scale retailers have a sustainable business model predicated on a strong value proposition for emerging consumers and a business model centered on the quick conversion of inventory into cash.
Small businesses operate completely differently than large chain stores. They focus on cash flow; their concern is whether they can cover their costs each month and have money left to replenish inventory. As a result, they typically do not manage according to such metrics as return on invested capital, sales per employee, or inventory turnover.
That said, standard analytical frameworks that apply to modern retail stores are useful to highlight some distinct advantages of the small-scale retail business model. Although our productivity research showed the small-scale retailers’ monthly gross margin per full-time employee and sales per square meter of selling surface were significantly lower than those of large retail chains, small-scale retailers excel in managing inventory turnover. We found that the monthly gross margin return on inventory for small shops is more than double that of large chain supermarkets. (See Exhibit 2.)
Small-scale retailers’ dependence on cash, plus the fact that inventory mismanagement is so obvious in a small shop — the products gathering dust, the empty space when products are out of stock — forces them to impose rigorous discipline on their inventory management. Even if small retailers lack sophisticated inventory management tools, they commonly receive help from distributors and direct-delivery manufacturers, so they can keep accurate records and determine appropriate order size.
Yet inventory management is not the secret of their resilience. To really understand why the small retailers’ business model is sustainable, it is necessary to look closely at net operating profit, particularly their labor cost advantage. Small retailers’ labor costs are generally lower and more variable than those of the large supermarkets because most of their employees are family members. Employing a close relative gives the small retailer greater flexibility to adapt the employee’s hours to fluctuations in store traffic. It also means retailers can often make the bulk of their employees’ pay noncash remuneration — for example, room and board for the son or daughter who lives at home. There is a lower risk of theft, and evasion of employment and other social taxes is easier since there is little threat of a family member filing an employee grievance.
Informal business practices, especially tax evasion, can have a significant, advantageous impact on a small-scale retailer’s profitability. However, even if informality were totally eliminated, only truly poorly performing traditional shops would fail. The stronger ones would simply absorb the costs of operating according to formal business rules by raising their prices.
Small retailers can also save on such general expenses as security, cleaning, marketing services, and administrative costs, which account for 3 to 10 percent of sales for larger chain retailers, because store owners or employees handle these tasks themselves. Energy costs are low since there usually are no air conditioners or large banks of refrigerators and freezers in the small stores, and lighting is kept low.
Measured as a percentage of sales, we found small retailers have operating expenses lower than or comparable to chain supermarkets’. One well-known chain in Argentina reported operating expenses as 32 percent of net sales — more than double the 14 percent observed at selected small-scale retailers.
Serving the Segment
Retailers who don’t want to wait for the theoretical and long-term “trickle down” effects of rising incomes to grow their markets have several business options to consider. One is to target subsegments of emerging consumers in certain geographic areas, and to develop a business model that can be replicated in an extended network of stores. But companies will need to be more inventive and bolder than they have been in the past to profitably meet emerging segments’ needs.
Small retailers in Latin America have proved they are formidable competitors. Our study shows that they have a good business model — one based on efficient inventory management, low operating costs, and attention to the daily purchasing needs of emerging consumers and their personal preferences. Learning how to adapt some of these practices to their business models is critical to the large retailers’ growth, but such adaptation will be hard. Emerging consumers’ predilection for buying small-ticket and thin- or lower-margin items, their self-restraint as shoppers, and their tendency to browse rather than buy could mean low returns on promotional spending. Retailers that try to open new supermarkets closer to target neighborhoods but use modern retail formats are likely to have lower gross margins and
Existing supermarkets could change their approach to selling fresh fruits, vegetables, and meats so they’re more culturally appealing to everyone. Supermarkets can also address the concerns of low-income consumers who feel intimidated when they shop in those stores. The value proposition of the small stores is to make products accessible, and to offer friendly, helpful service. Large stores can do this better than they do. Respectful and supportive treatment of low-income customers goes a long way to getting them to return regularly.
Just as in the case of large retailers, consumer-goods companies face significant challenges to profit from serving emerging consumers. However, the magnitude of the opportunity has already moved multinational players like Unilever, Cadbury, Coca-Cola, and McDonald’s to target emerging-market consumers in countries such as Brazil and India. Typically, manufacturers have reacted to this opportunity by adjusting their value propositions and reconfiguring their business models along three dimensions, each representing increasing business transformation.
The transformation can be company centered and product centered, affecting important variables like price, package size and design, and branding. This involves repositioning of products and brands as well as adjustments to promotions and distribution. Or a specific consumer segment can be targeted, which requires a redesign of product attributes, production, and distribution. Significant business process change is introduced through changes in business objectives, performance metrics, and channels. In some cases, this could lead to acquisitions. A third route is redefining the entire industry value chain. Supply chain relationships may change or be eliminated. Major production and technology changes may be introduced. This can lead to strategic business transformation.
Whether the company is a retailer or a manufacturer, these initiatives represent an important shift in the paradigm for serving low-income consumers. Companies that successfully make this shift not only are likely to profit from their new business models, but also will be making an important contribution to the economic growth and social welfare of emerging nations in Latin America, and around the world.
Booz Allen Hamilton conducted this study for the Coca-Cola Retailing Research Council–Latin America. The council, which includes a group of major retail leaders in Latin America, devotes itself to studying issues of relevance to the retail industry in the region.
The research covered Argentina, Brazil, Chile, Colombia, Costa Rica, and Mexico. The study classifies consumers according to five socioeconomic strata (SES): “Upper-class” and “upper- to middle-class”; “lower-class” and “lower- to middle-class” (the emerging consumers); and “subsistence.” SES ratings are typically based on a number of variables including asset ownership, occupation, and education. Although annual per capita income level is not considered in the SES classification because this information is so difficult to verify, in this article, we use “low-income” and “lower-middle-income” interchangeably with “lower-class” and “lower- to middle-class.” SES ratings are relative; the purchasing power and characteristics of an “affluent” household in one country can be quite different from those of an “affluent” household in another country.
The primary qualitative research used four focus groups conducted in each country for a total of 208 participants. Target participants were emerging consumers and women who typically make the bulk of household purchases in the food, beverage, personal care, and cleaning products categories and shop regularly in at least one type of small-scale retail outlet. Secondary sources consulted included SES profiles from local marketing research associations and previously published, relevant consumer studies.
Fieldwork in each country included 217 store checks and 190 in-depth interviews with small retailers. Comparisons with the large-scale retail trade are based on selected players in each country for which financial information is publicly available. Country fieldwork also included interviews with distributors and tax practitioners. Other secondary research and data sources consulted were syndicated data sources such as ACNielsen, local retail-oriented associations such as ABRAS in Brazil and ANTAD in Mexico, and journal and popular press articles.
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Guillermo D’Andrea ([email protected]) is chairman of the marketing department at Instituto de Altos Estudios Empresariales, Universidad Austral in Buenos Aires, research director for the Coca-Cola Retailing Research Council–Latin America, and coauthor, with John A. Quelch, of Cases in Strategic Marketing Management: Business Strategies in Latin America (Prentice Hall, 2000).
E. Alejandro Stengel ([email protected]) is a vice president of Booz Allen Hamilton based in Buenos Aires. He advises consumer-goods and retail companies throughout Latin America. His recent work has included marketing and channel strategy, postmerger integration, and commercial and organizational effectiveness.
Anne Goebel-Krstelj ([email protected]) is the director of corporate finance for Pliva, a Zagreb-based pharmaceutical company. She was formerly a senior associate with Booz Allen Hamilton based in São Paulo.
Also contributing to this article were Booz Allen Hamilton senior vice president Jorge Héctor Forteza, senior associate Alejandro Frenkel, and vice president Francis Liu.