Problem: What problem is this project trying to address?
The reality of Chile, despite an image as one of the most developed countries in Latin America, is that 70% of those with the fewest resource struggle daily to satisfy their most basic needs. The price of a basket of basic food items, a key economic indicator, has increased by 6.3 percent in less than two years, and while the cost of living is rising, the wages are not moving at the same speed. Communities on the edge of Santiago are stuck in systems that reinforce their social and economic
deficiencies. Urban sprawl has left the most vulnerable communities stranded in the periphery, with difficult or nonexistent access to basic services, such as reliable transportation, parks, libraries, and quality schools. With this lack of infrastructure, there are few places to congregate, accelerating fraying social fabric and increasing isolation and mistrust. (A study by the Organization for Economic Cooperation and Development shows that only 13% of Chileans have high trust in their fellow citizens.) Separated from the social center of the city by distance and the lack of reliable and affordable public transit, the most vulnerable neighborhoods become even more distant from the rest of the city. Also disconnected from lower prices in supermarkets in the city, individuals in these peri-urban neighborhoods are stuck buying goods from local vendors that, on average, cost 30 to 50 percent more. Due to low liquidity, they must buy only small quantities at once. For example, these lower income consumers cannot afford an entire box of laundry detergent; instead their salary may be just enough to cover detergent for one or two loads of wash at a time. The trend of being forced to buy at higher prices and in smaller quantities is the same for neighborhood grocery stores. Because they are small buyers themselves, often with little liquidity, local grocers do not get the lower prices from suppliers as do larger chains because, like their customers, they cannot buy in large quantities. Neither are they able to keep up variety offered by big chains, so they end up with very limited products and goods in stock. To compensate, the local grocers price goods higher than the supermarkets chains. This fundamental problem is compounded by the actual space and layout of local stores. Typically, the small stores have no storage space, leading to a poorly organized, often chaotic retail area. At the same time, large-scale, Wal-Mart style stores and supermarkets have increased their presence and lowered costs, pulling any customers that are able to access them away from the more expensive local vendors. Between 2009 and 2013, the number of large supermarkets in Chile nearly doubled, increasing from 972 to 1334 stores. Most of this surge came from four multinational companies, who together claim 94 percent of the US$15 million industry. These vulnerable communities and the neighborhood stores within them are waning; two facts that unfortunately reinforce each other. Unraveling social fabric in low income neighborhoods due to lack of meeting space and mistrust is only sped along by closing corner stores, once vibrant gathering spots, and increasing prices for daily goods that quicken income drain. However, herein lies opportunity. Within a context of distrust, smaller communities are the best places to begin rebuilding it. With the increased competition on the national retail scene from large chains, a door is open for new disruptive business models in Chile and beyond.
Solution: What is the proposed solution? Please be specific!
José Manuel Moller is revitalizing neighborhoods in the most disconnected, isolated areas on the edges of Santiago, the majority of which do not have access to fairly priced or quality groceries. By working through local grocery stores, his organization Algramo (“By the Gram”) partners with grocers to reorganize the stores, doubling their productive potential; to offer lower priced and more varied goods; and to reduce packaging waste. Through partnership with the vendors, José Manuel is both lowering the cost of living in these communities and restoring neighborhood stores as local gathering spots, ensuring the vitality of the vendors in the face of large supermarket chains and rehabilitating lagging neighborhoods.
These peri-urban communities, defined by a lack of access to goods and services, are also known for social and environmental problems such as segregation, unemployment, and environmental degradation. José Manuel saw that in these areas, low-income families and individuals are held back by prices of basic groceries. With very little available cash to purchase products in bulk, people are left with two options: buy in smaller amounts, but at a much higher price per unit or, buy from large chains outside the community, but at a higher cost of transport and drain of resources from neighborhood-owned stores. As a solution, José Manuel is reducing prices for the vendor and the consumer by about 30%. To do this, he is bringing together trust-based networks of local “Algramo Vendors” and is creating smart buyers who look for fiscal and environmental savings without compromising quality.
Building these networks of local vendors as partners is rehabilitating both the dying stores and the neighborhoods. Vendors now look to each other and to Algramo as partners and problem-solvers. Through the power of the network, local vendors are positioned to negotiate lower prices with big food suppliers, and through improved sales and storefronts, a culture of the local grocery as community meeting point is returning. Furthermore, José Manuel is revealing a new base of buyers asking for lower prices while maintaining quality and environmental integrity. He designed this solution after living in and alongside these disconnected communities and seeing both the lack of local liquidity and deteriorating infrastructure as barriers to their success. With similar communities dotting Latin America, Algramo’s solution is now poised to spread across the region.