The Role of Tax Privacy Concerns and Cost in the Digitization of the Nanostore Retail Channel

Millions of nanostores around the world face the prospect of digitization, which promises to create significant operational benefits. At the same time, however, digitization may be a risky endeavor. Through the application of a survey and experiments in the field with hundreds of shopkeepers, we explain the perceptions and behavioral processes that they incorporate in deciding whether to digitize their operations by adopting smartphone-based technology. We identify two main factors that influence shopkeepers’ decision making: Tax Privacy Concerns and Cost. For the first one, given the informal status of nanostores, shopkeepers exhibit privacy concerns for their operational data vis-à-vis the government. Further, we show that the Cost of a technology represents a significant barrier. Both of these features reduce the likelihood that shopkeepers will digitize, thus overshadowing expected productivity gains. Nevertheless, shopkeepers seem willing to digitize, provided technology adds enough value. Finally, we find that creating positive word of mouth that data is unlikely to be shared with tax authorities and reducing the price of digital technologies both help boost digitization