Ideas & Updates

Digitization Helps Small Merchants Keep Jobs and Profits in Mexico

© © Visa Mexico City

Guest post by Alicia Rendon Contro, Grupo Bimbo

woman holding a child handing over visa credit card to woman cashier in store

Photo Credit: Visa Inc. Mexico City

Ignacia is the owner of a “mom and pop” store in Metepec, a county on the outskirts of Mexico City, where she and her family members who work there sell baked goods, other food, beverages and everyday items. As new and larger stores came into the region, many small retailers were struggling to compete and some even closed. Ignacia noticed that many customers were going to the nearby convenience store instead of hers and grew concerned.

Micro, small and medium enterprises like Ignacia’s are essential for Mexico’s economy, generating 52 percent of gross domestic product and 72 percent of employment, according to data from the 2010 National Institute of Statistics and Geography. They also play a critical role as distributors for larger food and beverage suppliers like Grupo Bimbo which is the leading global baking company that sells products in over 2.3 million points of sale in 22 countries, including more than 700,000 stores throughout Mexico. “We have long recognized that small merchants are not only a growth engine for the country’s economy but also important for our national trade and, thus, it is critical to foster their development,” said Hortensia Contreras, Electronic Services Vice President for Grupo Bimbo and CEO of Blue Label Mexico, a leading provider of technology solutions.

In response to the impending threat of larger stores, Grupo Bimbo in partnership with Visa and support from Banamex, provided small store owners with training, technology and tools to increase their competitiveness, attract and sustain customers, including electronic services that allowed the stores to accept electronic payments, instead of cash-only.

Ignacia’s store now has a point-of-sale (POS) terminal that not only allows customers to pay electronically by any form of card, but also enables them to buy pre-paid airtime and pay their utility bills at the store as well as use food vouchers. One of the goals of Grupo Bimbo, through this initiative, was the inclusion of small retailers into the digital system. The introduction of the POS terminal also enables Ignacia to manage her store expenses and save profits directly on her bank account. Importantly, as a result of this digital innovation, stores like Ignacia are experiencing increased sales and profits. According to studies that measured the growth in sales at stores accepting electronic services, owners saw as much as a 20-30% lift in sales.

Customers also benefit from the electronic payment services because they are able to save time and money on transportation by having all the services in one location. “My customers tell me that they don’t have to go to other places which are far because I have a POS device that accepts ‘credit and debit payment cards’ and food vouchers,” said a storeowner. In addition, payment of bills is more convenient and since the stores also sell local goods, more money stays within the community and sustains local jobs.

To date, approximately 76,000 stores have a POS terminal with Red Qiubo, Grupo Bimbo and Blue Label digitization program, of which 28,000 accept payment cards.

The process of digitizing payments for Grupo Bimbo merchants’ network required detailed planning, a phased roll out, and close collaboration with various industry players for a robust, holistic effort to deliver benefits not only to the organization but also to the end users and consumers. Banamex and Visa were key to the implementation of the digitization process, including the rollout of POS terminals, bank accounts sign ups, and training personnel to use the technology and offer it to customers.

Grupo Bimbo is aware of the need for a greater shift in consumer habits to make digital transactions at the stores and increased electronic cash flow. Therefore, it is planning to continue efforts to incorporate value added products and services that contribute to the mom and pop stores competitiveness.

The work of Grupo Bimbo demonstrates the value that a company can deliver by digitizing a critical component of their supply chain. The digitization process that Grupo Bimbo started in Mexico has helped its network of small retailers to remain competitive by diversifying its offers. Ultimately, a strong distribution network contributes to Grupo Bimbo’s growth. But the approach is also strengthening the local economy, which ultimately is a win for suppliers, merchants, and the community as a whole.