Exploring the role of credit in social commerce for women micro-retailers
This post is by Ady Beitler, co-founder and CEO of Nilus, an impact-driven company dedicated to alleviating food insecurity in Latin America.
Alejandra Remigio lives in a food desert. ‘Food deserts’ exist where the cost of healthy food is higher relative to the broader population, and they are found in many underserved low-income communities across Latin America. These are caused by inefficiencies in the food supply chain, which deter supermarkets from establishing locations in low-income communities. For Alejandra and others living in food deserts, this results in higher costs for essential products compared to those living in middle-income areas.
Yet, Alejandra’s reality is shifting for the better. “The wide variety of products, good prices, and convenient hours mean I no longer have to leave the community and waste time going to the supermarket,” she explains. “Instead, I can enjoy that extra time with my family.”
Through the development of innovative technology, Nilus facilitates the efficient distribution of nutritious food and essential groceries to underserved communities situated in food deserts. Nilus relies on community group buying networks, organized and led by women, to provide consumers with healthy food and groceries at a discount. By aggregating thousands of consumer purchase orders and sourcing directly from producers, Nilus cuts out intermediaries and secures volume discounts on food. Using pickup points and sourcing surplus food further reduces costs, resulting in an average discount of 20% compared to local convenience stores.
Nilus operates in Buenos Aires and Mexico City. As of December 2024, the company has served more than 750,000 low-income people through our women Community Leaders (CL).
Currently, after a customer places a grocery order on the Nilus digital app, the CL in their area confirms the order, which is then delivered by Nilus to the CL within two to three days. The customer retrieves the order at the designated community pickup point and pays the CL using cash or digital methods. Upon receiving payment, the CL becomes responsible for remitting the collected amount to Nilus within three business days (and subsequently charges Nilus a fee for the service).
However, customers do not always pay CLs on the same day that their deliveries arrive. This mismatch can limit CLs’ ability to fully utilize Nilus’s cost-saving benefits. At Nilus, we saw an opportunity to offer credit to bridge that gap.
In partnership with Mastercard Strive, Nilus aims to assess the potential of credit utilization to enhance the company’s positive impact on its Community Leaders (CLs) and the underserved customers whom they support. Nilus is conducting research to assess whether offering extended payment terms to CLs impacts their capacity to provide similar extended payment terms to end customers. Our project aims to determine whether this approach leads to increased customer spending and/or repeat purchases, and in turn increased commissions for the CLs and savings for customers.
(Re)designing payment terms for women community leaders
To better understand our CLs and their customers, we conducted ten in-depth interviews and two focus groups with CLs from Mexico and Argentina. These are the most important things we learned:
- CLs typically extend credit only to customers they know and trust.
- The credit terms offered by CLs usually mirror their own payment terms with Nilus.
- CLs often lack the financial resources to cover unpaid customer debts owed to Nilus.
- CLs are hesitant to offer credit to unfamiliar individuals due to the risk of assuming debt.
- CLs expressed a preference for Nilus to either guarantee customer defaults or extend credit directly to end customers.
- CLs suggested that customers should bear the cost associated with accessing credit.
This initial feedback was certainly illuminating, because CLs are already extending informal credit to end customers when they confirm their orders on the Nilus app without immediate payment. However, the risk of losing their reserved merchandise — since it will be offered to someone else if they fail to pick it up — serves as a strong enough deterrent to ensure customers follow through.
These learnings led to an expansion of the project’s scope, incorporating direct testing of the credit system with end customers alongside the planned pilot with more than 300 CLs. Early survey results from end customers in Mexico and Argentina suggest that a credit system for grocery shopping is unfamiliar in this market segment. Of the 50 customers interviewed, 75% said that they never took credit to finance their grocery shopping and that they prefer immediate cash payments for groceries, reserving credit for larger or less frequent purchases. This learning is illuminating: customers who shop with Nilus don’t feel like they are taking credit, when in fact they are, albeit for the short period of time that elapses between when they place the order and when they pick up the order.
The results of this experiment have been eye-opening and unexpected. They highlight the need for support beyond credit for those with lower incomes and emphasize the importance of financial literacy and nutritional education. While the positive impact of healthy eating on health and finances is clear, there seems to be a disproportionate aversion to risk associated with food choices compared to other consumption behaviors.
This connection deserves further investigation to understand how credit systems can be better utilized to address food insecurity. Nilus stands out as a useful tool because it can collect alternative credit scoring data based on the purchasing habits of its customers. In the coming months, we’ll share more on our progress and lessons on extending payment terms for women CLs and their customers, to understand how these terms modify the purchasing behavior of essential groceries for those living in food deserts.
