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This exploratory study identifies key pillars on which innovative business models rely in the Latin American retail landscape. First, using qualitative research methods, we delve into the minds of Latin America's emerging consumers to uncover their needs and paradigms. In a region where retail innovation has traditionally been targeted at high-income consumers, we find a new breed of retailers that cater to the large mass of emerging consumers. Second, we explore the avenues of innovation retailers have followed to serve this impoverished segment and find that retailers' efforts to innovate have resulted in at least three original retail formats: one centered on providing access to durable goods, another centered on offering a wide assortment of goods and a convenient location, and the last one centered on incorporating design and quality. Based on the wheel of retailing theory, we show how these new formats are changing the structure of the retail industry in the region.

To understand the drivers behind small‐scale retailers' collective success, even after a decade of sustained growth of the “modern” retail sector in Latin America.

The study described in this paper was sponsored by the Coca‐Cola Retailing Research Council – Latin America. Consumer research for this study was based both on primary and secondary sources. To understand the drivers behind small‐scale retailers' collective success, standard frameworks were adapted for evaluating their value proposition and business model. Customer‐facing value drivers were examined along with selected ratios from the strategic resource model.

In spite of being “poor,” emerging consumers have a substantial purchasing power as a group. They work with a very specific set of products, categories and store format needs that distinguish them from other consumers. These distinct needs imply that it is not “just a matter of money and time” for them to change their purchasing patterns over to the “modern trade”. In fact, the evidence shows that smaller scale retailers fit the needs of emerging consumers quite well. Despite perceptions that the small retail sector draws its resilience from informality, we conclude that that the sector can be surprisingly efficient. Furthermore, the retailers exhibit a sustainable business model.

Although a wide variety of studies have been developed around small‐scale retailers, less effort has been devoted to learn about local storekeepers that are actually conducting successful business, especially in reference to less developed countries.

To understand the role of promotions among other key drivers at determining consumer's overall store price image (OSPI) of grocery stores in Latin America, identifying its relative importance.

The study was conducted in five major cities: Bogotá Buenos Aires, Mexico City, Santiago in Chile, and Sao Paulo. Over 3,000 consumers were interviewed away from their shopping places, and 3,000 SKU's covering 30 categories were monitored using AC Nielsen data over a 32 week period of time. Eleven elements widely considered to build price perception were classified in five main heterogeneous levers and tested.

Only two out of the five levers – prices and assortment – are consistently and broadly relevant accounting for nearly 75 percent of the price perception. Consumers' diversity was apparent and so their attitudes towards promotions. We identified five major segments with different price attitudes and reactions to promotions, that were present in all the five cities covered, though their proportion varied. Consumers considered a limited set of SKU's to form this price perception, and promotions had a minor role, except for those segments more interested in them. Promotions may cloud price perception accuracy among consumers, and drive the existence of bigger “bargain hunting” segments.

How OSPI is built is a relevant issue for retailers. Promotions are frequently used to build traffic, but its role in the OSPI is not so clear. They may strengthen the bonds with customers, but may also have a negative impact. Retailers may benefit from these insights when defining their promotional strategies, especially when considering EDLP strategies. As the study is based on five capital cities in Latin America, its results may also be of interest to retailers working in other emerging regions.

The research objective was to understand what low‐income or emerging consumers living in the Latin American region understand as value when considering retail offerings.

The methodology employed for primary research was qualitative. Six of the major markets were selected: Argentina, Brazil, Chile, Colombia, Costa Rica and Mexico. Four focus groups were conducted in each country, resulting of a total of 208 participants. Target consumers were women from the emerging socio‐economic strata (SES). Secondly, this study relies upon a wide selection of secondary research and data sources: syndicated data sources such as A.C. Nielsen; local retail associations such as ABRAS in Brazil and ANTAD in Mexico; journal and popular press articles, SES profiles and previously published, relevant consumer studies.

Rather than emphasizing their limited income, emerging consumers as a group represent a sizable market for consumer products. But they should not be addressed as a single group: peculiarities among them underline the need for further segmentation, as in higher income segments. Their needs should be better defined as basic instead of just simple, and they do not just go for the lowest prices or second brands, as they have marked preferences that characterize them. This also reflects in their shopping habits, which partly explains the resilience of the traditional/small format retailers. The findings underline these segments' relevance for consumer products, their rational behaviour as they try to reconcile their preferences with their economic reality, and how this explains their distinct set of products and format requirements.

Marketers and retailers interested in catering to lower‐income segments will find clues to understanding the preferences, habits and needs of these segments that represent a significant portion of emerging markets.

Conclusions are presented here in the form of six common myths on emerging consumers that are contradicted by the findings. The relevance of this study comes not only from the significant size of this market but also from the possibility of marketers to emphasize the social contribution of business.

Through the analysis of the case, the students will be able to: 1. appreciate the dynamics in a multi-channel environment especially in the relatively new ecommerce space in India; 2. understand the decision-making process and the impact on various stakeholders in adopting a new ecommerce sales channel; and 3. evaluate financial implications of channel profitability and its implication on the decision.

Philadelphia Home Products (PHP) India was facing a sales slowdown and was looking at a foray into the e-commerce channel, as an answer for business growth. The decision was not an easy one, as it had implications on existing channel partnerships and the organization. Channel choice decisions had acquired a new dimension with the proliferation of ecommerce platforms and changing online consumer buying habits. It was January 2015 and Nandini Devgan, CEO of PHP India was with her experienced team, who clearly had differing points of view. She needed to put the organization back on a growth trajectory, but how does she balance the various differing views put forth by her team? Was entering the ecommerce channel the best option?

This case is designed for use at the postgraduate level in courses, such as sales management, channel management, e-commerce and strategic marketing courses, as well as in executive management programs. The case is relevant from the context of channel management of a Consumer-Packaged Goods company in India, where e-commerce is nascent yet growing. It gives students a practical hands-on decision-making situation, where there are complexities of quantitative and qualitative nature. It triggers a discussion where the chief executive officer (CEO) and her team are facing growth and profitability issues, and have to take a decision on whether or not to adopt the e-commerce channel while managing the existing channels.

Teaching note is available for educators only.

CSS 8: Marketing.