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McCann Network’s ‘Truth About Street’ research across 20 countries finds small businesses in Latin America play key retail role but feel overlooked by major consumer brands. Business owners also hope for better qualified staff and expanded space.

Small business owners, who account for more than half of GDP in many Latin American countries, feel that major consumer brands tend to ignore their potential value as sales partners, according to an extensive 20-country study conducted by McCann Worldgroup. The “Truth About Street” research study, based on 3,500 interviews with small business owners in the food and beauty fields, explored a range of beliefs held by these entrepreneurs, including about self-perception and growth as well as about marketing and brands.

The study, called “Truth About Street—In the Trenches,” was conducted in September 2013. About 2,000 employees from the McCann ad agency network went out “into the streets” of 26 cities in 21 countries in the region to conduct the fieldwork. They interviewed 3,500 small business owners who operate in the food and beauty industries (bars, restaurants, hairdressers and grocery stores). The research was conducted in Argentina, Brazil, Paraguay, Uruguay, Chile, Bolivia, Venezuela, Colombia, Peru, Ecuador, Guatemala, Nicaragua, Costa Rica, Puerto Rico, Panama, Trinidad & Tobago, Honduras, El Salvador, Dominican Republic, Honduras and Mexico.

The new study covered four distinct dimensions that factor into the world of the small business owner.

  1. Their self-perception as entrepreneurs
  2. Their perception of the business itself
  3. Their knowledge about the market
  4. Their relationship with the brands they sell

On self-perception

The success of the business is associated with the personal success of the entrepreneur, the study found, as 46% of the entrepreneurs cited “control” and 49% mentioned “discipline” as vital elements in how they run their operations. According to 55% of the respondents, their business would not prosper if they were not involved day-to-day in running it.

Social recognition is also an important driver of entrepreneurship. To 34% of the entrepreneurs, society recognizes the importance of their role and their hard work (33%), while 24% believe that their business is a source of pride for their families and allows them to be respected more by people.

On the other hand, a minority believes that, as a small entrepreneur, he/she is seen as someone of no value (7%), who is not educated and, as consequence, did not have other career choices (5%), or is incapable of having “a real job” (3%).

On entrepreneurship

One of the most valued aspects associated with the status of being an entrepreneur is independence: 31% of respondents emphasized the value of making their own decisions and 19% of managing their time. Above all, the majority opened their own businesses seeking to ensure their family’s progress, including that 34% said it was for well-being and 24% for economic stability.

The great majority of entrepreneurs said they succeeded without help, through their own trial-and-error experience in which innovation was seen as an important business driver (41%) and a differentiating factor in the market (26%).

“On average, small entrepreneurs are conservative, because they see innovation as involving money or radical change,” said Solis. “However, due to the balancing act required in the difficult daily routine of their business, they show great potential for adapting themselves to new ideas.”

On the market

Among the elements recognized as fundamental to success are a loyal customer base (58%) and proximity to customers (46%). “This loyalty is not measured based on the frequency of sales or on the average price, but on the trust relationship between the business owner and the customer, who often are also friends, neighbors, and social colleagues,” observed Solis.

Having a more qualified team is on the top of the list of the entrepreneur’s dreams (43% when it comes to hairdressers owners, 39% restaurant owners, 35% bar owners and 22,6% grocery stores owners), followed by greater physical space for the business (around 28% in grocery stores and restaurants segments and 23% in hairdressers and bars), having a second business to increase income (varying from 11 to 15%) and being able to close their business during one week every year without losing money (around 12% for grocery store´s owners and 7% to other businesses).

To the question “What would you do to have a more profitable business?,” 35% said that they would use ads to attract more customers, 33% would carry out constant promotions to have repeat customers, 29% would learn more about customer service, and 25% would meet all customers’ needs.

On brands

The relationship between entrepreneurs and brands is strictly transactional because, according to the interviewees, the major brands are only interested in their own businesses, and not in the relationship or growth of the small entrepreneur.

When analyzing the best things brands already do in the relationship with them, the small business owners listed the use of advertising as a sales tool (60%), the payment methods offered (51%), the sales force (44%), incentives to keep their products in the catalog (38%), and the physical and promotional material provided to display their products (38%).

“It is important to highlight that, with respect to the sales force, we noticed that small entrepreneurs have a good relationship on a personal level with the sales representative. But this good relationship does not carry over to the brand itself that is represented by these professionals,” Solis explained.

The importance of the brands to the business varies based on the segment in which the entrepreneur operates. The entrepreneurs who expressed the greatest dependence on consumer brands are the owners of beauty salons (39%), followed by grocery stores (33%), bars (30%) and restaurants (25%).