Forum Institutional

COVID-19 has intensified the digital divide

Irma Huaman poses for a photo in her grocery store in Gosen City, a slum in the Villa Maria del Triunfo municipality on the outskirts of Lima  March 18, 2014. Huaman arrived in Gosen City 12 years ago when it was just a settlement. She initially worked as a street vendor, until she acquired a loan to build her own store. A number of residents in Gosen City, a slum that grew up near a garbage dump on the outskirts of Lima, have seen their lives improve as parts of Peru feel the effects of years of economic growth. Peru's President Ollanta Humala has pledged to cut poverty to 15 percent by the end of his term in July 2016. He is still a long way from his goal, but the poverty rate is coming down, falling just under two percentage points to 23.9 percent in 2013 from the prior year. Picture taken March 18, 2014. REUTERS/Mariana Bazo (PERU - Tags: BUSINESS POLITICS SOCIETY POVERTY EMPLOYMENT)ATTENTION EDITORS: PICTURE 07 OF 15 FOR PACKAGE 'LIVING THE PERUVIAN DREAM'TO FIND ALL IMAGES SEARCH 'BAZO GOSEN' - Tags: BUSINESS POLITICS SOCIETY POVERTY EMPLOYMENT) - GM1EA6C0KKL01

Small retailers are a key source of economic support in communities. Image: REUTERS/Mariana Bazo

Carlos Brito
Chief Executive Officer, Anheuser-Busch InBev NV
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This article is part of: Sustainable Development Impact Summit
  • The pandemic has intensified a weakness of small retailers: their digital capabilities.
  • The loss of small retailers will inhibit the economic recovery in Latin America, South East Asia and Africa.
  • Global companies can help accelerate digital transformation for small business owners.

The COVID-19 pandemic has given us valuable reminders about what is important. All of a sudden, we see just how closely interconnected we are and how much of our happiness, progress and prosperity depend upon others. This is true at both the individual and other levels.

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The larger the company, the more complex the ecosystem of partners and their interdependence is. In our case, studies show that this is particularly true in developing countries where brewing beer sustains millions of livelihoods dependent on a fragmented and traditional trade such as corner shops, grocery stores and small retail.

The COVID-19 pandemic has intensified a fundamental weakness of micro and small retailers: their digital capabilities. In developed countries, people often assume everyone has high speed internet access and therefore, that transitioning from doing business face-to-face to doing it virtually should simply be a matter of training. However, when the only way your business has ever functioned is face-to-face, then suddenly you have to walk miles to the nearest Wi-Fi location, when you can’t afford a smart phone or computer, there’s no successful examples to follow and straightforward solutions are unavailable – that’s when you realize that tech is not equal.

Suddenly, access to technology became another source of inequality and vulnerability for millions of small retailers in our value chain. Businesses that play a critical role – both in their communities, and for our business, as an important point of connection with consumers – were unable to immediately meet the new digital demand. Developing markets are struggling with digital migration and are unable to adapt quickly because they lack the necessary technology, among other barriers to tech adoption.

Small retailers provide a key source of employment and economic support in local communities and they represent an industry sector that we cannot afford to let disappear. A recent report by Boston Consulting Group estimates that in Latin America, small and medium-sized on-premise businesses (e.g. restaurants, bars) and traditional stores (e.g. corner stores, small grocery stores, mom-and-pop shops) account for more than 95% of outlets and more than 50% of food and beverage sales. Traditional trade also provides jobs and incomes to millions of poor families, who often rely on them for credit – not just basic goods and services. The majority of these retail owners and operators are women – as many as 70% in the Andean region.

Pivotal Role of Small and Medium-Size Businesses in Traditional Trade and Food Service.
Image: Boston Consulting Group

In Latin America, traditional trade has been significantly impacted due to COVID-19, with the Brazilian Institute of Geography and Statistics reporting that more than half a million small businesses in the country were forced to close definitively due to the pandemic. A second wave of COVID-19 infections and associated lockdown restrictions could put the entire traditional trade sector further at risk. Broken credit, damaged supplier relationships, and lost customers will make economic recovery even more challenging.

This is likely to be a similar story globally. The resulting loss of small retailers will inhibit the economic recovery in Latin America, South East Asia and Africa. Global companies can learn from others around the world and apply lessons in the areas that need them most; from helping traditional trade develop core business skills such as bookkeeping, to more technical and digital transformation. It is critical for businesses like ours to use our scale and capabilities to support the small businesses in our value chain so that they not only survive the pandemic, but thrive as they reopen, helping to bolster the world economy. Here are a few ways we are doing it:

Collaboration: We, along with other fast-moving consumer goods companies (FMCGs), have access to the value chain and the ability to reach this vulnerable group through coordinated action. One example of this is Movimento Nós – in Brazil, where we partnered with Coca-Cola, Heineken, Nestlé and others to help reopen 300,000 small businesses, employing approximately one million people.

Infrastructure: We are offering digital solutions to allow businesses to safely reorder our brands via mobile apps and via digital menu applications for in-store consumers. Tienda Cerca, a free, online delivery platform for essential supplies, food and beverage is helping small, local stores stay open across South and Central America. We’ve also invested and developed uncomplicated online supply platforms for small and medium-sized business in Brazil (Menu) and Mexico (MiMercado).

Financial inclusion: Many small retailers are unbanked, so enabling access to affordable financial products and services, such as banks, savings accounts and credit will be key. We have a number of possible solutions for retailers. In Brazil, for example, we created our own fintech company called Donus to serve this purpose. We also have strong partnerships that extend credit to small retailers in Mexico, Colombia, Peru and elsewhere. Even before COVID-19 we invested in these innovations because they play a key role in saving these livelihoods by helping them be more competitive.

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What is the World Economic Forum doing to manage emerging risks from COVID-19?

We are part of many communities around the world, and we are committed to being part of the solution now and for the long-term. We are proud of the work being done but know there is more to do. Our purpose of bringing people together for a better world has never been more relevant than it is today. We are collaborating across industries to accelerate digital transformation for small business owners. We look forward to partnering with others who share our passion for being part of the solution.

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The views expressed in this article are those of the author alone and not the World Economic Forum.

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