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Spanish-American startup Frogtek just won the biggest competition for European mobile startups, Vodafone Mobile Clicks, with its app to help small shopkeepers in emerging markets run their businesses.
According to Frogtek, a Mexican stall-like, microretailer stocks an average of 1,000 products from 25 vendors and is often managed with nothing more sophisticated than a paper notebook. Frogtek wants to change all that with the help of the $206,000 (150,000 EUR) prize.
The product consists of a bar code reader connected to a mobile application running on an Android smartphone. Every product sold is scanned and tracked by the application. This means that shopkeepers can, often for the first time, track inventory, calculate daily sales, identify best and worst selling products and order online from vendors. Access to these simple metrics can be nothing short of revolutionary for shopkeepers.
The inspiration for the product came from micro credit agents in Colombia who, 5 or 6 years ago, started using PDAs to record data from credit rating interviews with applicants who ran shops. “For many of the shopkeepers this was the first time they had seen their numbers” says Frogtek CTO Guillermo Caudevilla. “And they said ‘I want something like this for my business.'” Founder David de Ser heard about this project and saw that since Android phones had become available he could make an application accessible to these shopkeepers.
The first market was Colombia, where Frogtek has run pilots for 2 years, and the startup hopes to be in 500 shops by the end of the year. Mexico is now also a focus, with 120 shops already up and running. According to Caudevilla, 1 in 100 people in Mexico run a shop, and microretailers are responsible for 5 percent of GDP. Worldwide there are more than 40 million microretailers.
Microretailers are of great interest as distribution channels to large vendors like Coca Cola and Procter and Gamble as well as banks, mobile payment companies and micro-credit institutions. However, because of the owners’ informal or non-existent accounting systems, accurate data on their activities can be hard to come by. Frogtek’s business model is based on selling that data as well as getting a commission on online orders made via the application. Big companies will also often purchase or subsidize the phone and bar code reader. “We are starting a trial in Mexico with Coca Cola.” explains Caudevilla. “We just signed an agreement with the third biggest company in Colombia to have another pilot and the second phase of that would aim to reach 120,000 shops in Colombia within 5 years.”
Subsidization is certainly necessary since the cost of the equipment, $100 for the bar code reader and $200 for an Android smartphone, is still prohibitive for most microretailers. The big challenge for Frogtek in the future is therefore to create partnerships with large companies who reach thousands of microretailers.
Most of Frogtek’s competitors make applications on PCs for larger retailers like minimarkets. “We are the only people doing this on a phone, which is 2 or 3 times cheaper. The application is completely tailored to the needs that they have in emerging markets,” insists Caudevilla.
A big issue for all social enterprises is how to measure their social impact. Often they use a combination of breadth, the number of people reached, and depth, the impact on individuals. When it comes to gauging depth, Frogtek has an advantage. “We are making a measuring tool.” Caudevilla says. “At some point we can measure if they are selling more, reducing expenses, increasing margin, whether they have given up selling bad products. What we are doing is giving these people the power to make the best decisions.”
Frogtek was founded in 2009. Its 18 employees are based in Spain, Colombia, Mexico and the United States, and the company is currently angel-funded. One of the investors is Josh Mailman, the first investor in Grameen Phone, the biggest mobile operator in Bangladesh.