Total Quality Management and Nanostore Performance in Informal Retail: Evidence from Honduras - A Structural Equation Modeling Analysis of Mediation Effects

Abstract

This study examines the impact of Total Quality Management (TQM) on nanostore performance in informal retail settings, exemplified by Honduras, using Structural Equation Modeling (SEM). A cross-sectional survey of 170 nanostore owners revealed significant relationships between TQM practices and performance outcomes: β=0.45 (p<0.001) for customer satisfaction and loyalty (CSL), β=0.39 (p<0.001) for operational performance (OP), and β=0.30 (p<0.001) for competitive advantage (CA), with R2 values of 0.45, 0.40, and 0.38, respectively. Mediation analysis showed that employee engagement, customer involvement, and process formalization account for 42–50% of TQM’s effects, thereby advancing TQM theory by identifying mediating mechanisms in micro-retail. Urban nanostores exhibited stronger TQM effects than rural ones (e.g., β=0.50 vs. 0.40 for CSL), reflecting higher customer density and infrastructure access. These findings provide theoretical and practical frameworks for implementing TQM in informal retail, offering strategies for micro-retailers and policy insights for inclusive economic development.