Having actors like Oxxo, Listo! and Tambo+, convenience stores in Peru not only represent an evolution in the way of purchasing, but also awaken growth opportunities amid changes in lifestyles.
The phenomenon of convenience stores experienced significant progress in Peru in 2023. These establishments have become the organized and efficient response to traditional neighborhood "bodegas". With more organized services, quality control and varied payment options, these stores began to offer a more complete experience to neighborhood customers.
“There are two main types of channels where mass consumption products are sold: the traditional channel, which includes warehouses or market stalls; and the modern channel, the supermarkets. Each one of them addresses particular consumption occasions”, explains José Ruidías Rojas, partner in the consulting company Global Trade Marketing and professor at Pacífico Business School to AméricaEconomía. “Convenience stores have found a value proposition that brings together the best of both worlds, and that is possibly the secret to the 'success' of this channel.”
In Latin America, Mexico is the country with the largest number of convenience stores, with the Oxxo chain as the leader. At the end of September 2023, the Femsa group chain had 22,352 Oxxo stores, of which more than 20,000 are located in Mexico and the rest in Chile, Colombia, Brazil and Peru.
In second place is Chile with 1,484 convenience stores, according to the geointelligence services company Xbrein. As in Mexico, Oxxo is also the market leader, followed by the Gulf, Pronto and Upa stores, located mainly in service stations throughout the country. While in Colombia, Oxxo already has 346 stores, according to the real estate services company Binswanger, and they compete with On the Run (Esso and Mobil), Altoque (Terpel) and Tigermarket.
Meanwhile, in Peru there are 675 convenience stores, according to Lock - Research & Insights. In this market, the Tambo+ chain (from the local Lindcorp group) is the one with the largest number of points of sale, followed by Oxxo (107) and Listo! (from the Primax service station group).
The speed of store openings is diverse. In Lima, for example, a convenience store opens every 8.3 days, while in Bogotá it happens at an interval of 7.7 days, and in Santiago de Chile it is every 5.2 days, according to Binswanger Perú.
“The mix is between location, variety, and standardized service processes”, Ruidías describes the value equation of conventional stores.
Likewise, he adds that, in his experience designing strategies for various channels, there is no philosopher's stone that will make you a winner.
THE COEXISTENCE OF CONVENIENCE STORES WITH DISCOUNTERS IN PERU
“At the Jorge Chávez Airport they have set up a Listo! store that is breaking it because it has solved a latent need”, says José Ruidías. “Everyone complained that at the airport there is no availability of low-priced mass consumption products.”
According to Ruidías, another factor in the success of the convenience stores is that they have been able to successfully apply the fundamental marketing principle, which is to understand the customer to serve them correctly. And to do this, he presents the case of Tambo+, because although location selection is key, “they are very careful in selecting high turnover categories” in certain areas. There is an understanding of consumption occasions, information processing of habits, analysis, and software that helps make the decision of what products to offer because they adapt to needs.
In the Peruvian market, the coexistence of two convenience formats stands out: discounters, which offer lower prices in exchange for fewer purchasing facilities; and convenience stores, which have a greater assortment of products and a better customer experience. However, the average purchase ticket between both formats is quite similar.
During 2023, convenience stores achieved a market value (sales) of US$ 162.8 million, and discounters US$ 444.1 million, according to Euromonitor International. Furthermore, and according to Patricia Buchhammer, expert solutions manager of Kantar Worldpanel Peru Division, the spending structure of Peruvian households in recent years has grown constantly and is mainly leveraged on emerging channels.
According to Buchhammer, in 2021 the ticket in a convenience store exceeded US$ 7.3, with a visit frequency of 8.4 times a year. At the end of 2023, the ticket was US$ 6.1 and shoppers visited the point of sale 10.3 times. While in the case of discounters, lower tickets are observed, but with a significant increase in the frequency of visits, visiting these formats at least once a month in the last 12 months.
“Both formats have a similar pricing strategy because although in convenience stores you find the packaged category and in hard discounts you can find fresher products, in both they sell, for example, soft drinks, and a significant difference in price would not be consistent ”, explains Ruidías. “They are occasions for consumption, more than the public, which differentiates them.”
He adds as an example the DINX (Double Income No Kids), a consumer segment that during weekdays can demand massive products and therefore will buy in convenience stores, while on weekends will prefer fresher products from discounter stores, even leaning towards using other sales channels (supermarkets).
On the other hand, today the shopper prefers omnichannel. And convenience stores, being formal, large and corporate chains, have greater negotiating power to establish alliances with intermediaries, as in the case of Rappi and the mobile payment application Yape, and encourage purchases with exclusive discounts to through them.
“They use technology to enhance the customer's purchasing experience”, summarizes the professor at Pacífico Business School. This is its advantage over traditional wineries, however, it does not mean its extinction in the short term.
“There is still a space for the more traditional public, for those not so progressive, attached to modernity or technology”, he says. “We have 450,000 stores, the same number of stock we had 20 years ago.”
The value proposition of traditional wineries is “friendliness, in the landlord (seller), that they call you by your name, that they greet you, that they trust you.” In addition, they play a role as a point of social concentration, such as a “bodega on a corner with a television.” Therefore, if they accelerate the pace, as they did against supermarkets, they would be a greater competitor.
The challenge is the scarcity of available spaces, especially in strategic locations. According to RE Propiedades, a corporate real estate consulting and marketing company, differences in income expectations between owners and operators make it difficult to reach profitable agreements. Likewise, municipal restrictions and regulations, such as licenses, may represent additional obstacles to the operation of these stores, ultimately impacting the evolution and diversification of the convenience store business sector in the country.
However, the panorama offers various opportunities for the growth and expansion of convenience stores in Peru. According to José Ruidías, of the 450,000 warehouses, 200,000 are in Lima, so the first strategy of convenience stores for 2024 will be to finish settling in the capital due to the constant increase in the population, especially millennials and professionals. executives, which suggests a growing market for stores, supports RE Propiedades.
And the change in the lifestyles of the inhabitants, driven by younger and technological generations, opens new opportunities. The demand for more varied and healthy products and services creates space for diversification of offers in convenience stores. Furthermore, the growth of this format has also been favored by the increasing number of office buildings that, at the time of their construction, include spaces for commercial premises on the first floor.
Second is geographical diversification. Demographic and economic growth in the provinces drives the expansion of convenience stores. “They have already tested the model in the north. As it can work even on 30-40 m², the decision is quick. Wonderful to see how they reorganize the space”, says Ruidías.
Finally, the third strategy is alliances as a differential value for convenience stores, since taking advantage of the proliferation of the technological issue, negotiation with last mile services and other platforms is attractive for these intermediaries who benefit from their geographical distribution, allowing them function “like a spider web”.
According to RE Propiedades, guided by the reality of Oxxo in Mexico, an opportunity to promote convenience stores is to offer a service supported by artificial intelligence (AI), which eliminates checkouts and allows customers to make contactless purchases.
