Bright future ahead for Kirana stores as they embrace Digitisation

Digital transformation of Indian Kirana Stores

While enterprises like Amazon, Big Basket, Grofers and many others have captured the customer’s eyes, the crucial role that local retailers, popularly known as the ‘Kiranas’ play should not be overlooked. Most of us have shifted to online shopping for our basic needs, but these traditional local retailers face many challenges in adapting to this growing digital world, especially since they are not as tech-savvy as the new players in the market.

The shift towards online and big brand shopping has left the Kirana store owners disappointed. They keep losing their customer base to these brands due to several reasons such as convenience, increase in mobile usage, cheaper internet services, and so on. The online essentials (mainly groceries) market, as reported in 2019, witnessed a growth rate of 25-30% in Indian metropolitans and other emerging cities.

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Market share of online grocery in India 2019 by company
Published by Statista Research Department, Mar 25, 2021

This shift to online platforms does not mean one can dismiss the role of local small/medium scaled retailers and Kirana stores. One of the easiest ways to show how the existence of these stores helps individuals is by assessing their functioning in this pandemic. When most supply chains fell short of stock, e-commerce companies involved in delivering essentials like bread, vegetables, milk and other such daily-use items, faced huge travel and transit problems amidst the nationwide lockdown. It was in these times that people realized the importance of local vendors and stores.

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Share of Indian Kiranas in grocery selling
Source: SME Futures

Kiranas and other local stores, which fall into the unorganized sector, comprise a mighty 13 million shops/stores around the country. Kirana stores account for 90% of the grocery retail market. The pandemic, however, should also provide retailers with insight into how to become more flexible and adapt newer techniques to cater the modern customers. The increased integration of these stores into the digital economy will bring massive amounts of changes to this sector of the economy which currently contributes 11% to the GDP. 

While most of these Kirana stores are involved in selling groceries, this occupation lies under threat as the concept of e-groceries is starting to gain momentum. Lockdowns and COVID-19 restrictions gave ample time to the online partners to brainstorm on current shortcomings resulting in accelerating the growth of the E-grocery market.

At the same time, the situation for Kirana stores becomes concerning as studies show that only 3% of the Kiranas were tech-enabled in 2018. Some could survive the transition into the difficult times of the pandemic and started using online payment applications like Paytm, GPay and so on for transactional purposes, and WhatsApp came in handy for taking orders. However, around 20% were forced to shut down amidst the pandemic (over 600,000). These vulnerabilities will continue to exist if Kirana stores are not digitized in the near future.

Unless local retailers adapt and change their way of operating, this economy will see a dip, as even food delivery partners like Swiggy are entering the essential goods delivery spectrum. According to data, the online grocery market saw a massive 75% growth in a span of 1.5 years, with a gross merchandise value (GMV) of $3.3 billion in 2020. The market has proved its capabilities and potential for substantial growth in this sector, leaving investors impressed and wanting to contribute more. Rohan Agarwal, the Director of RedSeer, one of the largest management consultancies in India, says that this market will touch $24 billion by 2025.

e grocery 2025
Source: Consultancy.in

Today, local retailers are partnering up with online delivery partners due to the enormous amount of opportunities in the e-commerce sector. This will benefit them highly and help them make most of the opportunities available at the present time. Kirana stores will be able to supply their stocks to people ordering through these apps.

Advantages Taking local Kirana stores online

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Efficient management of inventory as Kirana stores go digital
  1. Efficiency in Management: Kirana Store owners cannot easily keep track of inventory levels, which result in damaged and expired products. 98% of these stores in India are managed by one single person. This makes management and operations difficult making them fall even farther behind in the race. Many store owners are now embracing technological advancements and procure daily goods through apps. This had enabled them to maintain lower working capitals but at the same time have wider access to commodities.
  2. Boost engagement and leave customers more satisfied: Indulging into the online network will definitely work to the advantage of these Kirana store owners. Today the problems lie within the traditional method of functioning of the Kirana stores. Having already experienced the convenience of online shopping, most customers avoid shopping locally because of the hassle involved. The flexibility of payment, delivery timings, home delivery services and extremely enhanced customer grievance redressal keep customers hooked to e-commerce sites. Going digital would help the Kiranas to benefit in these aspects. A study showed that the majority of retailers said that 30% to 50% of their sales started happening through credit/debit cards upon shifting to online modes. This not only benefits customers but also helps store owners to maintain an organized record of transactions.
  3. Increased revenue due to a larger customer base: These shops are basically found in nooks and corners of colonies, societies and markets, so revenue doesn’t tend to fluctuate much on a regular basis as the number of people visiting the shops doesn’t vary much. The most obvious of the benefits of going online for local store owners is that it would make their products and services available to a larger segment of the population. As per a study by Accenture, every Kirana store that underwent transformation experienced a revenue growth between the range of 20-300% while profits grew by 30-400%.
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Larger customer base leading to increased revenue and profits for Kirana Store owners Representational Image | Source: The Better India

Furthermore, retail modernization could help bridge the gap in rural and semi-urban consumption, where people are forced to visit nearby towns for some very basic needs. Going digital will allow these stores to come under the formal economy and help them avail benefit from the advantages of safety and security enjoyed by this sector. The formal nature of work also increases visibility and traceability. Better employment opportunities might also arise amidst digital transformations. (Invest India)

The COVID-19 pandemic was actually a push in the right direction for these Kirana store owners who avoided transformation for the sake of being conventional. It is important that the government too takes steps to help these store owners and not let mega stores and brands take over this sector completely. Kirana stores account for a major portion of the workforce and are the sole source of earnings for an extensive number of families. It is important that the stores see the digital transformation in a new light and allow these newer opportunities to serve to their benefit.

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