1,000 New Stores a Year: Inside OXXO’s Retail Expansion

1,000 New Stores a Year: Inside OXXO’s Retail Expansion

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Speaker: [00:00:00] Welcome to the Esri and the Science of Where podcast. Growing a retail chain is a road filled with potholes. Are there potential customers in that neighborhood? How do we tailor our product for that neighborhood? Could we do as well where the rent is cheaper? OXXO, a Mexican chain of convenience stores, has dealt with this on a huge scale.

Luis Espinosa, who heads expansion intelligence at OXXO, says location technology gives the chain a deep understanding of different needs of customers in differing locations and how those needs change. I

Speaker 2: think the key is to understand not only the, the, the consumer behavior, but also where he is. Where is the consumer?

Where is he going? What time of the day? Where, where, how, how is the consumer moving and where is he?

Speaker: Luis Espinosa talks to Esri retail expert Gary Sankary [00:01:00] about how the geographic lens brings clarity to OXXO's siting strategy

Speaker 3: Hello, Luis, uh, and welcome to Esri and the Science of Where podcast

Speaker 2: Thank you. Thank you, Gary.

Speaker 3: So Luis, can you tell us a little bit about what OXXO is all about?

Speaker 2: Well, OXXO is the, the, the largest convenience store chain in Mexico, in Latin America. Uh, we have with over 45 years of experience, more than 24,000 stores here in Mexico, only in Mexico.

But we also have stores in Colombia, Peru, Chile, Brazil. We entered the US, uh, last year, and we are 100% Mexican company. And yes, we're a convenience store, but, uh, different to the US, uh, here in Mexico, our, our stores, we not only sell, uh, the, [00:02:00] the, uh, traditional categories for, for a convenience store. I would say like 10% of them, they have a gas station.

The other 90%, it's around your corner. That's wh- our saying. We are around the corner. We are very near to you. Um, we not only selling beer and snacks, uh, soft drinks, we also have, uh, a lot of services, like you can pay, you can pay your bills, you can pay your taxes on the stores, you can get your, your, uh, your license plates.

So yeah, you, you can do a lot of things in, on, in our stores.

Speaker 3: And you know, when I'm thinking about 24,000 stores is mind-boggling. So that would mean that in a lot of your markets, you must have stores that are across the street, right down the street, really very, very close to each other. With that kind of saturated network, um, I know you're using [00:03:00] location technology to be able to figure out, you know, what is the optimal, uh, positioning for those stores.

But can you tell me a little bit about, you know, some of the, some of the decision-making that, uh, you're able to leverage with GIS, which is geographic information systems, which is at the core of location technology? 'Cause when, when you open one store, there's a lot of, uh, things that you need to, uh, you need to understand about that location, but how are you able to use location technology to be able to process that number of stores and make those decisions, um, with confidence?

Speaker 2: Yeah, yeah, sure. Uh, and yes, technology has been a, a very, it has, uh, a very important role in the decision-making process. Why? Because i- if, if you see any other expansion process across any industry, uh, it's pretty much the same across companies and across industries. You get the land, you acquire the [00:04:00] land, you build your store, and you open the store.

But first, you need to understand the market. You need to understand how do the consumers is behaving, and also not only because- Uh, for opening a new store, but also for your current stores. We have, uh, the, the same store, for example, is attending different markets during the day. It's not the same, the consumer, the customer that enters the, the store during the morning because maybe, uh, h- its office is, I don't know, uh, two blocks away.

And during the night there are also some houses around there, and it's also attending a different market, different, uh, selling different categories, different products. So because of that, we get a lot of data, and technology is helping us precisely on that. Understanding the data, um, simplifying the data and, or, and at the end of the day helps us [00:05:00] understand very, very well what, how the c- the customer is behaving and where should we locate a new store

Speaker 3: One of the stories that I've really latched onto that you told, um, at the, at our, one of our Esri events one time was about stores on both sides of a busy, busy street, and that-

Speaker: Mm-hmm

Speaker 3: on the way in you capture the breakfast market, and you've got things to grab and go for people to take into the office, whether it's the coffee or, um, or rolls or whatever it is. And then on the outbound, grab-and-go meals and things that people might wanna bring home for dinner. You're no longer greenfield, I bet, when you go into a market.

You're actually looking for what I would call seams in that market to find locations where you can, where you can not only put a new store that's gonna... And how it might affect the stores around it, but also, um, how do you make the stores that you already have more productive?

Speaker 2: [00:06:00] Yes, totally. And that, I think the key is to understand not only the, the, the consumer behavior, but also where he is.

Where is the consumer?

Speaker 3: Yeah.

Speaker 2: Where is he going? Or what time of the day? A- as you just mentioned, it's not the same during the morning that maybe is, uh, I don't know, uh, a, a mother who is carrying her son to school. Uh, and one, on one side of the street, and the other one is, uh, I don't know, someone waiting for the bus to go for work.

A- and you know, so, so you, you have to understand that also. Where, where- Okay ... how, how is the consumer moving and where is he?

Speaker 3: So, I mean, Mexico's a diverse country. You've got f- across, um, economic, uh, segments, you've got, um, references by town, by neighborhood, by street I bet. Um, are you a- able to take those into account, um, at scale when you're looking at this sort of, uh, analysis using [00:07:00] location technology?

You know, the way you just described it, services are gonna be in demand specifically by location and by time. But have you been able to actually impact your stores and, and drive growth based on decisions you make from a geographic lens?

Speaker 2: Yes, I would say that all of our stores have been decided in that way.

Because w- we, we, well, 50 years ago, 45 years ago, we have been always using maps. Uh, physical maps, uh, printed maps, uh, but we have always been using maps. From the market data, but also our own d- our own data from the current stores, uh, is input in the, in our GIS. And yes, we leverage all the decisions based on that because we, we must have now, uh, very precise location, uh, very [00:08:00] precise, uh, scope, you know, to, to, to find new, new, new locations.

To give you an example, uh, d- definitely it's not gonna be the same store or the same performance for a store, for the exact same store that we open in, in Tijuana near, near the US, uh, the one that we open in Cancun. It's gonna be the same behavior. The, the stores are gonna behave differently, and because they are attending different markets.

And yes, uh, socioeconomic level, um, it has also an important role. Uh, but not only that, bec- uh, for example, I don't know, a number of workers, number of, uh, households, uh, income per capita, you know, all those- Yeah ... all those variables, they matter.

Speaker 3: So if you can share, um, what sort of data, you know, when you're looking at building your segments and customer profile, what kind of data do you [00:09:00] find to be really, uh, relevant as you're determining your store offers?

Speaker 2: Yeah. Well, to understand the market, we, uh, and know presented for, for new stores, we look at data like, um, market segmentation. We all... As I mentioned, we also see our own data, how other stores are behaving, how are they performing, uh, what categories sell, we sell the most. Uh, and all that is, our GIS is actually helping us to, to understanding, analyze it and make decisions.

Speaker 3: You know, as a retailer myself, one of the secret sauces I see, um, with GIS and location technology specifically is the ability to, um, really interrogate all of this kind of disparate data, and what you've just described sounds like a lot of different kinds of disparate data. How do you stay focused with all of [00:10:00] the, with, with all of this, with all of this information coming in about all of these locations around, uh, well, really around the Mexico, the, and Latin America- Yeah

and the United States now?

Speaker 2: Yes, because you, you, you might get lost on data. Uh, as you just mentioned, we have a lot of data, um, a lot of terabytes and gigabytes of data daily. Um, so yes, w- how we stay focused is a very important question because what I always say, say in, in, in, when they ask me that, is that what must, um, drives you always, uh, is the strategy.

What are you trying to find? What are your goals? And then to always make a hypothesis, you know, to get, to get the data to, to that point.

Speaker 3: What kind of environment needs to be in place for you to [00:11:00] really bring spatial in- to really leverage spatial intelligence in an organization?

Speaker 2: It's always a challenge. I mean, you, you may have the, the best process, the best technology, the best tool, but if the people are not willing to use it, if the, if the people are not willing to follow it, you're gonna get trouble.

So I think that the key is to prove that technology is going to help you. How to, to, to, to really, um, convince all the users of the... A- and answer them, "What's in it for me?" You know? Uh, I think that's the key. Once that you find it, once that you can prove to guide that, okay, this is technology. I know that it's maybe challenging, uh, at first, but once they use it, once they prove, once they...

That you're, you, you have to be, you know, um, [00:12:00] using it and, and, and testing it, then you can see the benefit, and then you adopt it.

Speaker 3: As a, as, uh, uh, the manager of expansion, what, you, how big is your team?

Speaker 2: Uh, my team, we are, like, 20, more than 20 people.

Speaker 3: Okay.

Speaker 2: Um, because I'm not only, uh, in charge of all the intelligence, ex- expansion intelligence, but also the process of expansion.

Speaker 3: Yeah.

Speaker 2: Uh, how many... But, uh, however, we have, uh, also regional teams that are attending the expansion in different cities, different, uh, states, uh, and they are, they are the ones that make the magic.

Speaker 3: And does, does location intelligence help to ensure alignment between those teams, that, that your teams are on the same page?

Speaker 2: Yes, yes, totally. It is, is the, the, the, I would say the heart and the brain of the process. Okay. Because, yeah, [00:13:00] bec- the brain because it helps you understand first the new location. Uh, then during the process, once that you get this new location, uh, we're still understanding. We keep understanding the, the, the, the pro- uh, the, the customer, what we may sell, um, what products are we going to put in that store.

So yes, yes.

Speaker 3: So how, how has your use of the technology, uh, how has it changed your processes, um, over time?

Speaker 2: Yeah. Well, that's a very good question Let me say that we have been using technology in two different, uh, well, yeah, with two different visions. One is for the strategy, and another one is for the operation.

And what I mean by it, what, what do I mean by that? For strategy is that with technology, we understand not [00:14:00] only the new precise location, the new corner, but also our broad strategy. Where, where is gonna be the next city, next country even. Um, and it makes us, uh, and actually even discover new opportunities, uh, new growth opportunities for different segments, for example, for different markets that maybe our value proposition is not attending right now.

And those are more strategic decisions that we're making with technology, with GIS technology. And on the other hand, uh, yes, it be- it, it has been changing our processes by making it more productive, by helping the, the guy that is on the field, by helping those guys to locate, to be more precise where they're looking for a new location, where they...

when they are understanding their markets. For example, many, many, many years ago, [00:15:00] you had to go house by house and, and ringing the bell to count how many people th- they live in that house. Yeah. Um, you know? I, I, I mean, it... I'm joking, but that, that, that, that's maybe one example that, that technology, when it came, uh, well, inputting all the data, all the public data that we have and also our own data, basically all that disappears, so you are being more productive, so you can change the process now, so, and, and be more efficient.

Speaker 3: Well, I'm... Y- you know, I, I'm sure it wasn't that long ago that even, um, in companies I've been involved with where, especially on the, on the, uh, real estate side, people had map books really, you know, and I can remember- Yeah ... go to page here, go to page here, find this. So just, um, just curious, as you give people access to actual, uh, segmentation data and economic data, demographic data, [00:16:00] um, any, uh...

Did, did your team learn any surprises or did you have your field managers, uh, all of a sudden, "You know what? We thought wasn't real, and this is, uh, this is the new re- this is the reality now because we can show it with data and through this technology"?

Speaker 2: Yes. Well, we, we always, uh, we force ourselves to always have feedback from the guys in the field.

Always we must, because, yes, data can tell you- Well, uh, with making a lot of analytics that, okay, this is the best corner that you may get.

Speaker 3: Right.

Speaker 2: However, when we go there, there are many things that we must take into account since, I don't know, from, from, uh, government permits, for example. Um, or maybe on that corner you don't have electricity, you don't have...

Or you [00:17:00] will have to build, I don't know, a water plant. Uh, I, I don't know. So those kind of factors, those kind of variables, it's gonna be hard for technology. It's gonna be hard for data, at least the data that we have in Mexico. Um, it's gonna be hard for it to, to, you know, to, to input all that data into the, the technology.

So we need the guys on the field, definitely.

Speaker 3: So just kind of looking forward, um, into the future, um, what do you think, you know, what do you see as the future, but not just as a retailer and from a business strategy, but just as a, as a community partner and, um, how do you see that evolution in the, in the retail space?

Speaker 2: Well, I- I think that there's, yeah, there's gonna be a lot of changes, but, uh, we've been seeing, we have been seeing those changes since a years, uh, more than a year ago. Um, AI [00:18:00] is one of them. These new generations, to give you an example, for, uh, we have, I don't know i- in the US, but, uh, I think worldwide, uh, alcohol consumption, consumption is, is, is reducing.

Yeah. It's a big issue. Uh, exactly. And for, uh, if one store depends a lot of, of on beer and on the sales of that category, we need to do something different, you know? So- Yeah ... um, yes, the new generations, I think, yes, they're gonna change, well, the way that we sell them, what we call the hyper convenience. We are now entering what we call the, the niche markets, uh, niche stores inside a factory, inside the airport, inside the university, for example, I don't know.

What do you need? What do you need, and I will get it.

Speaker 3: What would you tell someone just getting into [00:19:00] the, uh, into the GIS business and retail, and what sort of advice would you provide them?

Speaker 2: Well, I think one advice, uh, don't be afraid of it. I mean, the benefits that you can get, uh, is like, well, any technological revolution, uh, in, in the history of mankind even.

For example, yeah, I know. For example, the fire. When we discovered fire as, uh, as humanity, well, yeah, fire can destroy you, but it has a lot of benefits, you know? Yeah. Um, it's, it like we're seeing like now with, with, right now with, with AI. It's the same. I mean, don't be afraid. Just use it, try to understand it.

It, it, it will, uh, return on your investment, I can assure you. So I think that's my main advice.

Speaker 3: Well, that's great. Um, Luis, thank you [00:20:00] so much for, uh, chatting with me today. I very much appreciate it, and always enjoy our conversations.

Speaker 2: No, thank you, Gary. I really appreciate it.

Speaker: Thanks for listening to the Esri and the Science of Our podcast.

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