Spotlight on Tenoli and the Future of Small Business Success in Mexico

By Connor Schoen

While reporting on Mexico might be focused elsewhere due to the current political climate, the country is undergoing a rapid economic transition. Namely, major supply chain issues are barring the country’s approximately one million micro-businesses, or tienditas, from breaking even and servicing over 100 million citizens that rely on them. Unlike the United States, most areas of Mexico have historically had no major wholesale conglomerates dominating their economy; instead, over a million of these tienditas have popped up throughout the country.

Now, as they begin to face competition from growing conglomerates like Oxxo, 7-Eleven, and Walmart, these tienditas struggle to gain collective bargaining power over such major wholesale providers, and they also suffer from the endemic challenges of an extremely inefficient and expensive supply chain. In fact, approximately eight Oxxo chain stores open every hour in Mexico, causing about five small businesses to shut down operations. This coupled with significant productivity declines in the traditional sector is wreaking havoc on the hopes of many retail-oriented entrepreneurs.

Tenoli is a new and growing social enterprise that works to support tienditas through network-building, distributional services, and growth-centric consulting. In an interview with HCIIG, the organization’s co-founder, Rodrigo Sanchez Gavito, discussed the extent of this issue: “What’s going on today in the [wholesale] industry is that in the last 5 or 10 years, there has been an explosion in the retail sector and particularly in the modern market... None of these micro-businesses have the resources to compete against these modern conglomerates.”

Ultimately, Tenoli aims to alleviate this issue by leveraging the collective bargaining power of the 3,000 tienditas in their network. They also provide small-business consulting and manage the supply chains of these stores--physically storing goods in a warehouse and orchestrating all of the transportation to the stores for increased efficiency at scale. In Sanchez’s words, they are “building a network of mom and pop stores to have positive network effects.” He expands claiming that “by aggregating demand, Tenoli can achieve better prices/deals for goods providers while receiving a small fee on [their] services and products for [their] own company’s profitability and sustainability.”

Overall, Tenoli is working to slow down what it sees as an “economic catastrophe.” To Harvey Powell, however, a former business executive and resident of Mexico, this is part of a natural evolution, a “creative destruction” working to modernize the Mexican business environment: “What you’re seeing here is not a new phenomenon. This is a trend that started decades ago in America and has been seen all around the globe.”

Nevertheless, many scholars studying this issue point to factors that make the Mexican situation unique. In an interview with HCIIG, Ximena Castañon, a Masters candidate at the MIT Supply Chain Management Program, stressed that “throughout Latin America, there is a huge entrepreneurial culture out of necessity.” Unlike in the United States, many Mexican entrepreneurs are motivated by financial needs—not a risk-taking, innovative impulse.

As Castañon’s colleague, Rafaela Nunes, puts it: “In America, entrepreneurs are mainly post-MBA grads who saw opportunity. In Latin America, entrepreneurs are predominantly the people who lost their jobs and don’t know what to do and start a business.” Therefore, the destruction of these businesses could be extremely catastrophic for certain lower-income portions of the population.

Whether you see it as an economic catastrophe or a natural modernization of the Mexican economy, this is a large problem for many store owners throughout the country. Thus, this issue presents an impact investing opportunity in companies like Tenoli as well as those organizations that focus on retraining efforts for displaced workers.