There are many possible approaches for start-up entrepreneurs to create value through digital technology. To start, entrepreneurs should identify pressing corner shop pain points they can solve with relatively easy shopkeeper adoption (what we call a “hook” product), as well as technology and financial solutions that deepen the relationship (or “engagement” products).
It is important to think about the entire corner shop value chain and identify inefficiencies and gaps ripe for digital disruption. To help entrepreneurs evaluate and prioritize these opportunities, we developed the following framework, based on our research.
This solutions-based framework breaks down shopkeeper pain points by the primary business functions any corner shop must do: buy goods, manage their store, sell to customers, and access financial services.
The Corner Shop Solutions Framework
BUY: How Shopkeepers Get Inventory
In emerging markets, purchasing and receiving goods is inefficient for corner shops. Given the fragmentation of these small, independent stores, many consumer packaged goods (CPG) suppliers focus on larger supermarket chains and franchised stores, leaving corner shops to go through multiple intermediaries. Shopkeepers can deal with as many as 100 different suppliers or spend many hours traveling to wholesale markets. This results in higher markups, opaque pricing, slower deliveries, more frequent stockouts, and lower shopkeeper productivity.
Addressing these buy-side challenges is fertile ground for technology entrepreneurs who can aggregate demand through B2B marketplaces and streamlined logistics operations, allowing for convenient purchasing, easy price comparisons, and timely product delivery. In parallel, this creates economies of scale efficiencies for digital platforms and better sales visibility for CPG companies.
MANAGE: How Shopkeepers Run Their Store
Although emerging market corner shops are gradually moving toward digital payments, their bookkeeping remains largely cash based. With handwritten records, shopkeepers lack tools for invoicing, collections, reconciliation, taxes, basic accounting, and other daily business needs.
Business management software can help merchants save time, manage cash flows, reduce unpaid receivables, manage inventory and store design, and better understand their business.
SELL: How Shopkeepers Serve Their Customers
Today, solutions for end-sales (such as online purchasing and delivery to the end customer) are generally too expensive or not available to small shopkeepers across the emerging markets. This presents an opportunity for tech entrepreneurs.
While the physical presence of the corner store will always be an advantage, online sales and delivery platforms can help shopkeepers expand their presence, run digital marketing campaigns, design product promotions, and set up customer loyalty programs. With the right tech services, corner shops can double as micro-fulfillment centers, with last-mile distribution and pickup for online orders.
FINANCE: How Shopkeepers Manage Their Money
Corner stores are underbanked, often relying on informal channels for access to credit and using cash-based and paper-based systems for managing their money. Brick-and-mortar banks and other traditional financial institutions have often struggled to serve corner stores effectively, given their small size and high degree of informality.
Tech platforms have the potential to become natural “owners” of retail finance relationships, making corner shop banking accessible, intuitive, and affordable by embedding financial products and services into their apps. With a ready set of existing customers and better visibility into corner shops’ business cash flows, technology platforms have an opportunity to offer tailored financial products at a lower cost and lower risk.
A Readiness for Online Tools: Voices from the Corner Shop
Across Brazil, Egypt, India, and Indonesia, shopkeepers told us that they struggle most with the “Buy” functions: purchasing and receiving inventory. For more than half of the respondents, sourcing their inventory was one of their top three pain points, as shopkeepers today spend large amounts of time navigating purchases across many suppliers. In parallel, corner shops’ limited product variety was the top pain point for consumers in all four countries.
Another top pain point for shopkeepers is inventory management more broadly: avoiding stockouts, knowing which products to buy, and knowing how best to allocate shelf space in the store. Access to formal financial services also remains a challenge. For example, across Indonesian shopkeepers, two-thirds rely on informal credit or are unable to access to a loan.
Many surveyed shopkeepers plan to adopt additional digital solutions in the coming 1-2 years, with the greatest focus on the “Buy” and “Sell” stages of the value chain. Yet on average, only half feel very comfortable with new apps. To be successful, new digital tools must be simple, intuitive, and build on existing digital behavior patterns.
Shopkeeper Pain Points and Digital Aspirations
Responses from 816 customers in Brazil, Egypt, India, and Indonesia. Finance data for Indonesia only.