Variety Stores in Colombia

PROSPECTS

Challenge of breaking cultural preconceptions that hamper the channel´s development

In Colombian culture, the saying “cheap can turn expensive” is deeply rooted and is one of the main challenges to face because local consumers perceive variety stores as a channel from which to buy cheap bric-a-brac, whose low prices practically guarantee poor quality, and lead to quick disposal, so the money invested would be lost. Variety stores selling items for approximately a dollar, have looked for greater share and have had little influence on the consumption style of Colombians, especially in major cities.

Popularising consumption of products, yet within formality and legality

Although variety stores is a strategic channel in retailing, it maintains a low profile for both the merchandise volumes it handles as well as its recognition for low prices. However, it also carries a reputation from the past for informality, illegality and disorder.

Awareness of the discount model, a development opportunity

Taking advantage of the awareness gained by consumers through discounters, variety stores has become a well-organised, formalised and financially safe channel, where Colombians can find different kinds of products at low- and mid-price ranges that respond to demand with acceptable quality. There is an opportunity to develop the channel because of consumers who are used to formal and legal retailers that offer them quality and low-price products, and who now understand more easily the existence of points-of-sale of non-grocery products at a fixed price that variety stores propose.

COMPETITIVE LANDSCAPE

Location is key factor to success

Variety stores are usually part of the landscape of city centres, thus becoming part of the variety and abundance of all kinds of utensils. Through attractive names such as La Locura and El Quinientazo, they invite pedestrians to come in and enjoy a huge variety of products that stand out more for their low prices than quality and brand names; however, they also allow Colombians to buy small items for other people.

A competitive landscape that renews every season

One factor that entrepreneurs in variety stores agree on is how cyclical the demand for their products tends to be. Therefore, to compete properly, the adaptation of the offer and the renewal of inventories is a premise in retail’s competitiveness.

Operational and financial leverage strategies to compete

The strategic and competitive landscape of Colombian variety stores allows players to have low, but constant returns. The landscape involves a very simple administrative structure, with a number of vendors that rise or decline according to the season, adequate negotiations with suppliers on volume and prices, and financial negotiations to use short-term credits, seeking to pay for everything in cash.

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