Shoppers queue at a state-run Mercal supermarket in Venezuela.

Shoppers queue at a state-run Mercal supermarket in Venezuela.

A crowd of people gather around a bright orange building, with orange and blue circles painted on the windows. In friendly letters, the building’s sign reads “Día Día Practimercados.” “Practimercados” is a portmanteau of práctico, “practical”, and mercado, “market.” The practical market. Día Día, or “day to day,” is the essence of the supermarket’s mission: to meet Venezuelans’ day-to-day needs in a country where food is often difficult to find.

The first Dia Dia supermarket was founded in 2005 by José Vicente Aguerrevere and Lucia Brower on a simple premise—that a company can make a profit while serving the poorest of people. Dia Dia has since expanded to serve more than 70,000 customers in seven Venezuelan states, logging 1 million transactions per month. This growth, remarkable in any set of circumstances, is even more staggering given the Venezuelan government’s harsh restrictions on business and the country’s struggling economy. Dia Dia is an impressive business, for its ability to both help low-income Venezuelans and thrive in a country with business restrictions and an unstable economy.

Balancing Profit and Impact

Dia Dia’s defining characteristic is its ability to effectively serve the poorest Venezuelans. In an interview with the HPR, Dia Dia CEO Manuel Morales explained that previously, Venezuelans could either spend lots of time and money on transportation to big supermarkets for low price goods, or buy higher-priced goods at mom-and-pop stores that were close to their homes. Often, they chose the convenience of mom-and-pop stores. Dia Dia found its niche by offering numerous small stores located closer to local neighborhoods than big supermarkets, while still offering low prices. Dia Dia enables low costs by maximizing efficiency in processing goods. For example, Morales explained that they would sell “pre-packaged meats instead of having a deli.” These cost-cutting measures enable Dia Dia to offer both the convenience of mom-and-pop stores and the affordability of big super markets.

Dia Dia also has unusual loyalty from its employees in a time of skyrocketing employee absenteeism around the country. In 2013, the Venezuelan government instituted firing freezes for all public and private-sector employees. While this measure seemed like a positive protection for workers, it hurt businesses by discouraging employees from showing up to work. Venezuelan workers in need of money to buy basic goods can earn more money working on the black market—selling oil in neighboring countries, for instance—than through regular in-country employment. As a result, employee absenteeism across the country has reached 46 percent.

Absenteeism rates at Dia Dia have been comparatively much lower: in contrast to many other Venezuelan businesses, Dia Dia has been able to maintain employee loyalty by creating upward job mobility within the company. In a case study on Dia Dia, Michael Chu, a senior lecturer of business administration at the Harvard Business School, explained how Dia Dia set up a training center to prepare local residents to work at the supermarkets. They then created a clear promotion path, so that someone working in a shop can become that shop’s manager and then continue climbing the corporate ladder. Employees commit to their job so that they can achieve those promotions. In an interview with the HPR, Chu described this loyalty as one of Dia Dia’s “distinguishing characteristics.”

In addition to increasing employees’ loyalty, Dia Dia’s internal job mobility has the positive social impact of creating new jobs for locals. In 2016, the unemployment rate in Venezuela was a staggering 10.50 percent, which further contributes to the country’s political instability. Dia Dia helps mitigate the high unemployment rate by adding new jobs in local neighborhoods. Dia Dia “hires from the same population base that its clients are from,” Chu says, making a “very real, tangible, expression that it [is] a meritocracy, [and] that doing things well matter[s].”

Dia Dia’s model need not be unique to Venezuela; social entrepreneurs in other countries can utilize this business strategy to improve their communities as well. Even U.S. residents struggle to choose between cheap yet distant supermarkets and expensive yet close mom-and-pop stores. The problem is universal: where people exist, they will need food. To be successful, businesses must strike the right balance between convenience and low prices—which is what Dia Dia has done so well.

The War on Businesses

Dia Dia’s success is especially impressive considering Venezuela’s extreme economic hardships. The country’s inflation rate is currently 741 percent, making even the most basic goods—like food and medicine—unaffordable to most residents. Additionally, the country’s cash reserves have fallen to $10 billion from more than $30 billion in 2010.As a result, the number of Venezuelans applying for asylum in other countries has skyrocketed. Venezuelans now make up almost a quarter of all asylum applications to the United States.

Venezuelans protest the shortage of basic goods in Maracaibo.

Venezuelans protest the shortage of basic goods in Maracaibo.

One of the reasons behind the troubled economy is the government’s stifling of entrepreneurship. According to the World Bank, Venezuela ranks among the most difficult countries to do business in. In addition to the aforementioned firing freezes, the government has further hurt entrepreneurship by nationalizing businesses. For example, in April 2017 the government seized a General Motors plant.

Dia Dia felt the government’s presence strongly in 2015, when Morales was arrested and the government attempted to take over Dia Dia stores. Morales was jailed for supporting an “economic war” through boycott and economic destabilization. President Maduro claimed that the company’s “warehouse was full of all kinds of products” that they were hoarding instead of selling to citizens. Dia Dia’s response was that their storage was “only three days of inventory,” and was authorized by the government. The government then tried to seize the Dia Dia supermarkets, though Morales says “Dia Dia has won all criminal proceedings against the Venezuelan State and the company is 100 percent under our operational and financial control again.”

To thrive in such a hostile environment, Morales’ first strategy was to beat the competitors. Dia Dia did this by combining the proximity of mom-and-pop shops with the low prices of big supermarkets. The second strategy was to communicate wisely. Morales said that he wants to avoid the government asking “how do you profit from the poor,” by emphasizing that “food is a basic need” and that Dia Dia actually “create[s] social value for the community.” Finally, Morales emphasized that he keeps his distance from a hostile government. He said that “being close to authoritarian regimes is very dangerous,” and that it is better to operate independently.

The Days to Come

In the uncertain economic and political climate of Venezuela, each supermarket has hundreds of people waiting for more than six hours to buy basic goods at supermarkets every day. When supermarkets are found empty, people turn to the black market and find those same goods being sold at extreme markups. Venezuelans can spend more than half of their monthly income on just a dozen eggs on the black market. The political system is also crumbling. Venezuelan President Maduro’s approval rating is 21 percent, and only 9.6 percent of citizens support his re-election. As noted time and time again, Venezuela is ready to collapse.

Dia Dia is focused on surviving in the difficult climate, but still has ambitious plans for the future. Morales identified two ways for the company to grow. First, Dia Dia can continue to open new stores; the company represents four percent of the food distribution market, and hopes to compete with the informal, mom-and-pop stores that make up 70 percent of the market. But Morales also hopes that Dia Dia can expand beyond food to serve other needs, like healthcare and communication.

Ultimately, Dia Dia is a valuable demonstration that businesses do not need to choose between making a profit and positively impacting others; they really can have it all. The world is full of social inequality that leaves entire communities’ needs unmet. Savvy entrepreneurs can emulate Dia Dia’s business model by identifying unmet needs in their communities that will provide a loyal customer base. Then, they too can make both a difference and a profit.

 

Image sources: Wikimedia/The Photographer // Wikimedia/María Alejandra Mora (SoyMAM)

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