Tambo + continues to dominate modern convenience in Peru

Date : 05 February 2020

Oliver Butterworth

Retail Analyst

Tambo + has primarily driven the recent expansion of modern retail in Peru. Part of the Lindcorp Group, Tambo + opened its first store in 2015 and quickly reached 100 in just over a year. During its first year of operation it announced an ambitious aim to open 600 stores over six years. In January 2020 Tambo + opened its 400th store, in line to achieve this target in 2021.

What’s driving Tambo +’s success?

The Peruvian retailer’s success lies in its modern store design, small footprint, convenient locations and proximity to customers. Proximity and speed of service are becoming increasingly important in Lima, particularly for young professionals who are time-poor and performing smaller basket shops.

Tambo + stores’ size of between 70 and 120 sq m makes it easy for the business to locate new sites/land and, therefore, expand. It invests on average US$90,000 to US$100,000 per store, which also make it a relatively low risk capital investment.

Creating a differentiated offer…

Much of Tambo +’s offer consists of what you’d typically expect from a convenience store; sweets, cold soft drinks, alcoholic beverages etc. Its offer of low-cost breakfasts, sandwiches, and ready-to-eat meals successfully targets transient trade throughout different times of the day.

Source: Studio A

Where it differentiates is in its range of hot food services and ready meals. Being a Peruvian business, Tambo + understands local tastes and this has influenced its offer, which consists of empanadas, tamales, hot roasted chicken, pizzas, hamburgers etc. This gives it a competitive advantage over competitors like OXXO, as well as the bodegas (who sell mainly ambient products).

Meal deal combination offers
Source: Tambo +

Source: Studio A

…and modern proposition

Tambo + has developed a strong brand identity, with a distinctive yellow and purple colour pallet. The stores are modern and well-lit. Luis Seminario, Lindcorp Retail’s general manager, points out that bodegas (traditional mom and pop and neighbourhood shops) are often uninspiring, dimly lit, and sometimes dirty establishments, where pricing can be unclear.

Shopping at Tambo + (or in modern supermarkets) gives shoppers greater confidence. Contrarily, it could be argued that bodegas sit at the heart of the community and have gained trust and built long-standing relationships with customers inside the catchment.

Source: Peru-retail

Most stores are in Lima…

The vast majority of Tambo +’s stores are in the main districts of Peru’s capital city, Lima, where close to a third of the country’s population live. Many of these are located on high footfall streets, reaching on-the-move customers living and/or working in the capital. 

Tambo + stores, concentrated in Lima
Source: Tambo + Store locator

…but it’s starting to expand into the provinces

In the last two years Tambo + has been planning to expand outside Lima and into the provinces. In early 2019 it said it was centralising its logistics to enable this development. The business remains committed to this plan, but till now has opened less than 10 stores outside of Lima. After opening its 400th store in January, Seminario said “we already have more than 400 stores and this year we hope to continue expanding in Lima and [the] provinces." It certainly feels like there is an opportunity to expand into Peru’s second and third tier cities (Arequipa and Trujillo).

Competition from OXXO?

Mexican convenience retailer OXXO entered Peru in 2018 and has expanded to around 50 stores. In its domestic market, OXXO opens around 1,300 stores annually so, in time, it could become a key competitor for Tambo +, however this will not be easy. 

When OXXO entered the market, Tambo + already had over 200 points of sale in Lima and had a presence on many of the best strategic locations in the capital. Again, Tambo + benefits from its local area knowledge and understanding of the Peruvian consumer. For now, Tambo + is expanding the most rapidly in the market.

OXXO’s food service offer in a store in Mexico, limited to coffee and hot dogs
Source: IGD Research

Impact on traditional trade

Peru’s grocery market remains heavily dominated by traditional trade, which is estimated to account for 70-75% of sales. In Lima alone, there are thought to be over 110,000 bodegas.

When asked about if Tambo + competes directly with the bodegas Seminario said “in Lima there are more than 110,000 bodegas, so it would be pretentious to think that with 600 stores we [can] beat them. The bodegas will always be there, because they fulfil a different mission, more oriented towards the neighbourhoods”.

Whereas Tambo + stores are predominantly located on main streets (and more expensive locations), bodegas are often located on side streets etc. and at the heart of suburban neighbourhoods. Arguably convenience stores or ‘practi-tiendas’ like Tambo + and OXXO are more competitive against the big supermarket retailers due to the comparative practicality and speed of shop they offer.

Enhancing the proposition

In the second half of 2020 Tambo + is set to open a new food plant for creating more of its own products and to help optimise its operation. Seminario said “our new food plant will be operational for continuous improvement and sustained development in our products, as well as benefits in the operation.” In a separate interview he commented; “We will continue to focus on innovation, developing our own products and establishing strategic alliances with national and foreign brands.”

Expansion set to continue

Tambo + will maintain its rapid expansion in the medium term. On average, the business opens 10 new stores per month. It opened 121 stores in 2019 and says it plans to open 110 in 2020. This will take its total to approximately 515 stores by year end. The market share of modern grocery retail is much lower in Peru than other markets in Latin America, so there is further opportunity for modern retailers to grow.

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