Tienda Red, a fintech for the base of the pyramid.

???? Mexico's small stores are a powerhouse of the economy- more than 1,200,000 small stores generate 54% of Mexican consumption, 15% of employment, and represent up to 4% of the country's GDP.

In this week's #TechForGood Series, Chris Roldan, Founder, and CEO of Tienda Red, a Fintech bridging the gap for the base of the pyramid, discusses his experiences working for financial and digital inclusion of small corner-stores with a network of more than 20,000 stores throughout the country, 60% of them led by women ??♀? and 40% of these heads of family.

Chris shares with us his commitment to having a thorough understanding of small stores with a robust user-centered design and his vision for the future: scalable trust relationships amongst the network, providing timely and valuable data for store owners, more financially included, and connected in authentic communities that add value to their work with the proper technological systems that iterate and learn based on the actual context of each shopkeeper.

?? Check out this week's interview ?? to learn more about this fascinating initiative and his long journey of genuinely understanding small stores in Mexico ???? from the human, financial and technological dimension. This resulted in him creating a successful digitization model, geared toward the financial health of this sector.

Today he continues to work passionately with them to build the future of vibrant, innovative, and?smart-small-stores in the country (tienditas inteligentes).?

If tech and data-driven innovations making a social impact motivate you subscribe to our #TechForGood Series Newsletter here ??

???? Spanish version of this article ?? here.

#userexperience #trust #financialinclusion #inclusivegrowth #collaboration #data4good #tech4good

"The true differentiator of Tienda Red is its use of technology to provide shopkeepers with up-to-date information, and it does so while maintaining an authentic and engaging community ¨

Chris Roldán, Founder and CEO TiendaRed

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Nelly.?Chris, thank you very much for sharing the lessons you have learned, your journey, and your vision for the future with shopkeepers in Mexico. First, I would love if you could tell us a little about your journey and how you started working with Mexican "tenderos"? For many, this segment goes unnoticed. What motivated you to work with shopkeepers, especially with technology and the financial sector.?

Chris. Thank you so much for this space. It is a pleasure. I will try to make the story short. I come from the corporate world. I worked for many years in large corporations. Later, I moved to a tech company that was also leading social programs. They wanted to change the distribution of government aid previously distributed in paper vouchers into an electronic wallet.?

My life after that radically changed. Thanks to the skill and experience of Jorge Ponce, Juan Pablo Ayala, Alejandro Maldonado, and other coworkers, I learned the importance of the corner store and the incredible value of accepting electronic payments when competing with franchise supermarkets. In addition, the experience of working in the field and the contact with the shopkeepers captivated me. Later on, I went to a South African company called Blue Label Telecoms to put terminals in all the little stores in Mexico with a vision of eventually leading to financial inclusion.

I was so inspired when Rafael, the CEO, explained the phrase "being poor is very expensive." For some, it might sound crazy, but how is it that the electricity bill costs $24 and transportation to pay it costs $80? It doesn't make any sense, does it? At that moment, I understood the social contribution that technology could have for the inclusion, equality, and growth of people and their communities.

We had a significant challenge as a startup; although BLM technology already operated in 16 countries, we had to find allies to quickly reach a large number of small stores in Mexico. So, in a weekly meeting, Manuel -my leader and mentor- gives me the task of developing, together with the team in Bimbo, a pilot test to place our terminals in a group of stores and train the owners to accept payments for domestic services and cell phone recharges. It was so successful that Bimbo went from being our most important client to being our investor.?

I was fortunate to live the dream of many entrepreneurs. Went from being a startup with a vision with a small team to being part of a large company with thousands of employees, from placing 300 terminals in a month to 500 terminals per day.?

Being in the process of consolidation is a hyper strategic moment. Every action you take has an amplified result. At that time, I returned to the phrase "being poor is very expensive". With a network of 50,000 small stores, it was time to participate in our clients' financial inclusion and community. We needed allies such as banks or, better still, companies such as VISA or Mastercard. When I started knocking on the door of these super players, I was looking for them to give me an appointment with my pitch "we are the largest network of little stores" their response was, And? Who are these? We don't know you. Why should we trust you? A series of essential questions, when we finally got an appointment, what helped us to capture their attention was our knowledge of the market.

I always keep in mind the lessons I learned from my mentor Montoya and Moysen; they used to tell me:?

?-You stand outside the store and realize how many yogurts it has. Well, how many of all flavors? They were saying, at that moment you "read" if it has 1 or 3 of each flavor or if it has yogurt in a carton, if so, then the shopkeeper buys a carton with eight assorted flavors; the same happens with milk, soft drinks and the same with many other products. It sounds simple, but it speaks to the store's cash flow, sellout, and the relationship with their delivery guy. That bond could allow them to buy an assorted carton, something not all small stores can do.

I loved an anecdote when Moisen asked me: Do you know why they have their saints on top of a little box? I said, I have no idea, surely, they are very religious, right? He laughed and shared with me that regularly under the saint: in the little box is where they keep their legal documents to run the business, the civil protection permit, the electricity contract, the water, those are all the permits that the business requires. So, I said, ok, I understand; If you arrive at the store and see the saint and the box, it's a shopkeeper with an orderly and serious business.?

N. Yes! Never in my life had I noticed this.

C. So, all these things that on the desktop looked like stories and seemed qualitative to me had to be known, understood, and at some point, transformed into quantitative.

I loved this knowledge that I had the fortune to experience. When you visit the shopkeeper to get to know him genuinely, as a person, you become part of the store because you know that they are busy serving suppliers or his neighbors. For example: arriving at Do?a Carmelita's store, and she cannot assist you at that time. So, what do you do? You step aside, and when you least realize it, you're already serving customers. And it's in those moments; you begin to understand the operation of the small store and its needs.

Profitability and scalability are important, but you shouldn't overlook something that is much easier said than done: the user experience. The user experience must be a driver present throughout the business. If you grow and do not take care of your users, you will lose them along with the money invested in obtaining them.?

I remember some battles in the meetings with the finance area exposing the churn:

-Hey, we are losing very important clients!

-How much is very important?

-100,000 pesos per month.

-Don't worry, we have 10,000 of those...

-No, wait! The thing is that this is the only store in that neighborhood, the only store that 48 or 100 neighbors can go to. So not working with that shopkeeper means leaving 100 neighbors without access to that store, which means sending them back to the point where they pay more for transportation than the electricity bill.

?After this experience with BLM, where I witnessed first-hand the philosophy of doing good and talented people with a real purpose, and seeing it grow, develop, scale, and achieve a capitalization with great players makes me proud. I will always be grateful to have been part of BLM.

?And so, that's the story of how I started in this business.?

N. That's amazing; it's inspiring your journey of learning about the shopkeepers, the user experience, understanding their needs, and thinking much beyond numbers, right? Put a human face on numbers. Where does technology come in, and how can technology really help them to be productive, to be more efficient, how can it guarantee them a gateway to digital technology? Where is the technology in this, your other great passion??

C. Belonging to a team with such an important technological background gives you the benefit of learning every day. If I continue with the example of Do?a Carmelita and the clients who stop selling from one month to the next, the question for the rest of the team is: how will we scale our solution??

Went back to thinking of Do?a Carmelita; why did she stop selling her 100,000 pesos of refills? How many Do?a Carmelitas are there? Eventually, 500 stores with that potential were no longer selling. We made a map to locate the areas and identified that the operators' network did not offer a good signal with our terminals in these areas. What do we do? Do we lose customers? No, the only way was to develop a simple application to offer our service and training through a GSM phone without losing clients and focusing on our user experience.?

N. For our readers, what is a GSM phone?

C.?Phones that we used about 20 years ago that didn't have internet access, that at most have simple games and a radio. It has very basic technology. That was the solution, something very basic. The technology does not have to be complicated or expensive; we offered a solution with cell phones that they use daily.?

That's how I started to experience technology; now I'll tell you about?Tienda Red.

It was clear to me that I wanted to contribute to the inclusion of underserved communities with a clear understanding that the corner store is the first "social bank" and that 51% of consumption in Mexico is made in these stores.?So, in one year, we traveled to 12 countries to learn first-hand what other entrepreneurs were doing with the same purpose in different latitudes, and in parallel, we developed our first MVP. The result was a fintech for the base of the pyramid.

?In 2017 everyone said you're crazy! Do you know how much money you are going to lose? And yes, they were reasonably correct, but by then, we had already understood that the microloan by itself is useless; The owner of the little store has had loan sharks, shylocks, family loans all his life, but it is difficult for him to access formal credit and technology. At that time, Fintech was only for those already banked, using traditional credit scores. So that's exactly what we did, create a new credit score engine for this population.?

I remembered my field visits with Moisen and his lessons "reading the store," and we found "N" number of store models: the one that only sells sweets, the one that sells groceries, the one that sells groceries with a creamery, the different models of refrigerators for the sodas, for the breweries. So, based on all the available information that we don't regularly pay attention to, it allowed us to create a highly accurate risk analysis engine, and that's where technology comes in.

Tienda Red was born as a fintech that developed our own risk analysis engine.?

We did A/B testing of our technology in two types of devices:?1. An Android version in cities where the internet signal is stable, and for the shopkeeper that uses social networks; 2. A version for GSM phones based on USSD for the most remote places where even though there is internet, the signal is not stable to guarantee a transaction. Technologically and immediately, we could originate our own loans for any store and become scalable.

Another question:?How do we communicate our purpose to the shopkeeper? Because in all this coming and going, we could offer loans, and? If it was only about the money, the only value that the small store owner saw was that now he had money to put tires on his car or have a larger 15-year-old party. But he didn't have any incentive to put the money into the business. So how could we infer in his operation to show him the benefits of not wasting money? And that at the same time, he didn't view us as another provider.

There was a moment that allowed us to merge our purpose with technology; suddenly, many shopkeepers from different parts of the republic, even many who had rejected us before, were approaching us. Many were suffering because each time a chain supermarket opened, it closed between 8 and 14 small stores around it.

We analyzed the problem and identified 5 points that were making a difference and killing the corner store: working capital, technology, replicable training, means of payment, and above all, updated market information.

Again! Money by itself does not solve anything. So we designed technology to solve these five pain points; we began by integrating the training model with gamification to ensure they went on with the rest of the modules. We communicated to the shopkeeper the importance of training; If you train yourself, you access higher lines of credit with longer terms and better credit rates.

By that time, we already had a significant network in 2018. We realized that commitment in some relationships with shopkeepers is easy to measure and in others not so much. The commitment of someone that completes all the training modules is a critical indicator. Someone who has 5 minutes to train, read brief notes, and is evaluated for his business and his family's well-being is a guy who will always pay.?

So, we integrated the benefits of the fintech world. Still, our differentiator became the purpose and knowledge obtained from people like Moisen, who understood the business of small stores, from leaders like Manuel, and strategists like Rafael. The latter had taught us about a sustainable business model, scalable operationally financially.

A crucial moment in our lives begins with Sabina Malacon's call to invite us to participate in SAFINN Irrazonable. In June 2019, we had the privilege of living three weeks with the incredible creators of VEXI, Miles for Retirement, Rutopia, Digitt, Mitz, Somos Via, Philanthropiece, Kessel, and La tritividad. Deep learning days with 40 mentors led us to question each step of our journey and growth plan. The sessions with Antonia Hoyos, Ivan Mansillas, Fabrice Serfati, Gabo Charles, Vicente Fenol, Armando Laborde, Raúl de Anda, and of course, you, dear Nelly, who showed us the path of Social Factoring was so revolutionary.

Thanks to everything we learned from July to December of that year, we placed ourselves among the finalists of all the events we attended: Rockstart Colombia, Nestle Youth Initiative, Leo Burnett's Latin Labs, CAF's Latin American Ventures.

We knew that we needed to join ELEVAR. This powerful acceleration program challenged us to achieve our milestones every month, supported by relevant mentorships with Chris Jare?o, Javier de la Calle, and Pepe Alverde. We will always be grateful and proud to belong to the Unreasonable community.

N. This is interesting. And what success stories could you share with me that you have seen in these years, stories that really helped you understand that you are generating an impact.

C. Do?a Carmelita, our first shopkeeper, is also in our committee of women shopkeepers.

What did we do with Do?a Carmelita? Do?a Carmelita is a lady like 50- years old; She is in a public market in CDMX, she had a very prosperous business, selling creamery and groceries, her profits were used to stock a small cellar in her house.

When her mother gets sick, she starts to reach for the little cellar in her house and then the little basement in the store; One day, we arrived with Do?a Carmelita, and we asked her: Hello, how are you doing? She tells us: you are always my angel. I am about to close the store. I invested everything I had in medical services for my mom's illness. It is essential to say that shopkeepers and independent merchants do not have social security. Therefore, when they get sick, they can lose all their assets.

We said, Do?a Carmelita, don't worry; we guaranteed her access to our Social Factoring program. She was able to ask our partner-wholesalers for the products she needed any time, and they supplied her in less than 48 hours. The best thing is that she could pay them in 7 days without interest and with accurate preferential prices. From that day on, this product is called Micro Loan of Supply.?

We practically lived in Do?a Carmelita's store, she taught us her buying habits, and we created statistics with her sales. She was used to buying boxes and packages. It was incredible to learn together how to buy efficiently. How much should you buy so as not to deny a product? This is very important, and if you deny a product, you don't stop selling a piece; you stop selling between two and four products, then Do?a Carmelita started working with us on this model of buying only what she really needed. We learned how to sell and earn money to improve the business's profitability and thereby provide economic stability to her family.

I like the story of Dona Carmelita a lot, she was able to help with her mother's illness, and she saved her business. Why? Because she allowed herself to re-learn, to make her business more technical or, as she says: to move money intelligently.

We have a community of 23,000 stores that are technologically connected with us. Of these, 16,000 shopkeepers make at least one transaction every day, whether a recharge or a purchase of inventory.

We have three channels: One is our reason for being, which is our Android application that is constantly evolving, and everyone has it; then we have a java application for GSM phones. The other device, which is the least, is the shopkeepers who have our point-of-sale system on their computer.

When we started, we arrived at the small stores and introduced ourselves to the shop owner r shopkeeper. I loved this because all the shopkeepers would greet you differently. But not today; today, we are known by word of mouth by the shopkeepers themselves and our commercial allies. Today, people call us by phone, send us a WhatsApp, or go to our website to create their account with their data, tell us about their operations. Then it all goes into our risk analysis engine (which I mentioned does everything, we call it the blender). First, it runs the algorithm and extracts the summary of the store's profile. Then, it gives us the amount and term of the microloan that can go from 1,500 pesos to 10,000 pesos at seven days without interest.

Once they have their account, they can download the application. All this happens in 20 minutes, from the moment they sent us a "hello" to when they have the app installed in their phone with an operation line where they can get access to many other digital payments.

Let me tell you how the shopkeepers are growing with us: Our goal is training through the application. You must complete and approve four of the seven training modules in the first four weeks. After the fifth week and timely payments, we open another portfolio that we call social factoring. The?Tienda Red Abasto Micro Loan?is an alliance with some wholesalers where Tienda Red acts as a credit guarantee for the shopkeeper.?

There is something very important, and it's a phrase that we use here: "ride the money" (jinetear). The relationship we have with the shopkeeper allows us to change their mindset so that they identify that not "riding money" (playing the float) and paying on time has greater benefits.

After week 8, with two months of operation, the seven approved courses, and the risk analysis engine, we have information to get to know the shopkeepers very well. By then, we can increase the line of credit and extend the term up to 28 days. How do we do it? We already know what you buy, understand the operation, and it's time to continue growing. Shopkeepers by then also realize they need to add new categories and use the money to buy a slicer or buy more creamery products, even get permits to sell wines. Ok, do you already have the permit? Please send us the photo. We work together, with focus. We also try to understand why and what they want money for.

We have done that until today. The response from shopkeepers is exciting because we handle a monthly delinquency rate of around 6%, which is quite acceptable in a market that is little explored institutionally. However, what makes me think that our purpose makes sense is that, at the end of 2021, we had no more than 2% default of the total that we backed for the?Abasto MicroLoan.?This speaks of the significant relationship we have achieved with the shopkeeper because he does not see us as a supplier. Instead, he sees us as his ally.

The difference of Tienda Red is all the benefits that we bring to the ecosystem of the small store; that is why they give us priority when paying.?

N. Exactly! Hey, and how many are women? How many small stores are led by women?

C. I love this question; it grew a lot with the pandemic. They used to be about 50%, now, over 60% of women are leading a store, and 40% of this universe are heads of family.

That is why we have our committee of women shopkeepers, 40% are responsible for family support, they are working women who help their families, this gives us essential visibility of what happens in the communities; Before if you lost your job, you had two options: be a taxi driver or open a store in your house. This work has fundamental values: maintaining a home, a family, its a significant challenge. We know women who get up at 5 am to prepare the children's breakfast, bathe them, send them to school, help them with homework, feed them; all that seems routine. But imagine doing it alongside a business that requires 16 hours a day!

We are proud of the women who lead a small store.

N. Hey, and the last question, what changed with the pandemic, and what did it leave for the future? And what is the best possible future that you dream of?

C.?I think that the pandemic has brought regrettable things, but it has also been a trigger and has made everything run very fast. For example, we had been trying to bank people for many years. Therefore we had been trying for years to make e-commerce grow and that more people would shop online. We had been dreaming for years that everyone could pay in small stores through their cell phone or their metro card, and today it is a reality.

What happened to the stores? The same thing that happens with?Tienda Red?its a trust relationship. When the pandemic started, the news showed the corridors of the supermarket empty, no paper, no milk! And who do you think could supply it? The pandemic reminded us of the importance of corner stores and their relationship with the community.

In those weeks, we identified that sales skyrocketed 200% and, in some areas, up to 400%. Although it was intense work with distribution to guarantee the supply of basics and cover new consumption habits, our shopkeepers are heroes without capes. They managed to place glass rubber protections and have some protection against covid and continued to provide the service, some even without having digital means of payment.

Fortunately, when the pandemic arrived, there were already companies that had been trying for years to get small stores to use their POS, there were already enough options for the shopkeeper to accept credit cards, debit cards, and vouchers through the cell phone or some device; In a couple of weeks, the fear of taxes and the lack of technology knowledge disappeared due to the need to take care of oneself and continue offering benefits to the neighbors. Today, some shopkeepers not only have a device to accept cards, but they have two and even 3.

At Tienda Red, we strengthened our alliances and added more allies. We updated the computer version in a few weeks and enabled our?Point-of-Sale System. During 2020, we trained almost 5,000 shopkeepers.

Before the pandemic, the shopkeeper used to say: why do I want a point of sale? Today, our shopkeepers have a solid point of sale system, as powerful as chain supermarkets, allowing them to have information in real-time and accept credit and debit cards. Moreover, we have the support and trust of huge companies, including Mercado Pago – I'm their fan, we share the vision of always having our user at the center.

We want to be the best ally of neighborhood stores. Our free technology will allow them to manage and operate their business so efficiently that they will survive and be more competitive and profitable.

Today, with our system, they order suppliers online 24 hours a day, without calling anyone, with real-time availability of the products they need. Still, not only that, it has an algorithm that suggests to the shopkeeper how many units he/she needs to continue holding this month's sale.

Our training modules are being renewed every time our community expresses a need. With the point-of-sale system, the shopkeepers ask us for content that is very focused on management, product rotation, promotions, even at their request. We have just released a module of promotional campaigns in the system so that they communicate their offers to the neighbors, and another module created by them is the price band. This tool allows them to be competitive without sacrificing utility.

We want the 16,000 shopkeepers who connect to our application every day to use the point-of-sale system so that they are trained. This is the true differentiator of Tienda Red. We use technology so that the shopkeeper is highly informed, and how do we do it? Through a true community.

This year, we will launch the point-of-sale system in an Android version so that more shopkeepers can use it. Therefore, we are going to reach more cities more shopkeepers so that together Tienda Red becomes the community of tech-savvy and informed shopkeepers at the service of Mexicans.

N. Yes, then the future is the smart small stores, ???tienditas inteligentes

C. Yes!

N. Exactly. Chris, how inspiring the work you do and so necessary. It's great to hear that there is authenticity, commitment, and human connection; that is something that I believe distinguishes you. It is not only a professional commitment, a technical commitment. It is not only a business commitment but also a human commitment. I believe that this will always give you a sense of purpose and vision in a cycle of continuous improvement that will make you continue to be an inspiration to all of us who know Tienda Red and those who are ambassadors of this good work, of this great idea.?

?Thanks for sharing!

?? You can follow Chris Roldan and learn more about Tienda Red, here ??

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