“Kirana shops can be extended arms for e-commerce players”
IIT Roorkee’s Dr. Rajat Agrawal opines that we need to facilitate co-existence of e-commerce and unorganized kirana stores in our country. All players need to complement each other, so that both can co-exist.
TPCI: What is your view on Indian kirana store ecosystem? How has it survived the test of time?
Dr. Rajat Agrawal (RA): Supply of grocery in our houses is largely done by local kirana shops. More than 95% of kirana items are coming from these stores. But these are largely classified as unorganized. The ecosystem of existing kirana stores has some very special characteristics, which are not available in the e-commerce or organized retail sector. The important characteristic is the personal touch with the customers.
Kirana shop owners have very close ties with their customers. They understand their requirements very well. So, if anyone from the family goes to the shop, the shop owner provides the same quality, which is generally bought by the lady of the house. Another unique characteristic is neighborhood, and credit facility offered by them. Further, many local brands and loose products are only available through ecosystem of local kirana stores.
These kirana stores have survived because of their familiarity with customers, understanding the changing needs of their customers and the ability to provide products in flexible quantities. Products which need to be sold in proper packs can also be procured in loose quantities. So, a high degree of flexibility with respect to product offerings, payment system, delivery facilities and returnability are some of the important reasons of survival of kirana shops.
TPCI: What are the key issues that kirana stores face with the entry of e-commerce players? How has it affected their business model and sustainability?
RA: Kirana stores offer a lot of convenience to the customers. But at the same time, in India, there is the emergence of new segment of customers that has good purchasing power. These young people work in offices and have no time to visit Kirana shops for grocery purchase. The credit facility offered by Kirana shops are now given by Credit cards. The young Indian customer is more brand conscious. They also want a good shopping experience. E-commerce players are able to run their show on account of convenience of order, convenience of point of delivery, convenience of payment such as various payment apps, credit cards etc. E-commerce players are also learning best practices of the Kirana ecosystem, which is not true in the reverse direction.
Fast penetration of mobiles, low cost of data, large number of unemployed youth who can be hired as delivery boys and increasing attraction for branded products are strengthening the path of e-commerce players in India. This is certainly affecting the Kirana shops, but it offers a good opportunity to local brands to use these kirana shops to sell their products. Kirana shops in some of the fast progressing cities will have more challenges as compare to Tier 2 and Tier 3 cities. It will be required to understand the needs of local market more carefully. E-commerce players will find it difficult to customize the offers as per local demand. A kirana shop at Lajpat Nagar, New Delhi, for instance, should keep products, which are needed by the local residents of that area; while the kirana shop at Chittaranjan Park, New Delhi will keep different items, which are liked by residents of that area. E-commerce players will find difficult to compete with this level of planning.
TPCI: What advantages do Kirana stores have vis-a-vis e-commerce players? How has the Indian customer pattern shifted over the years, when it comes to buying daily essentials?
RA: E commerce players offer standard pack size. Kirana stores can give you any quantity. E-commerce players offer popular brands while kirana shops also offer local brands and non-branded products. Many products such as pulses, salt, sugar, oil & rice are purchased by many Indians on the basis of the trust of shopkeepers. They are not very choosy for any particular brand.
Though, mobile phones are fast penetrating Indian markets. People are become digitally literate but at the same time issues related to cyber security, data leakage, etc are also creating doubts in the minds of the customers. These customers are willing to buy from reliable E-commerce players only. They have fear of cyber theft, if some unsecured site is used for placing the orders. This aspect is going in favour of kirana stores. Kirana stores are also improving the layout of their shops for giving a better experience to the customers. Some shops are putting air conditioners.
Kirana shops are also trying to differentiate between customers on the basis of purchasing power. Earlier kirana shops used to serve mass markets, but now you can easily identify the target segment of a kirana shop just by seeing the appearance of the shop.
Over the years, purchasing power of indian customers have increased. This has affected the buying pattern also. It is expected that Indian retail is likely to touch US$ 1.3 trillion by 2025, so e-commerce will also find enough pie in this market and Kirana shops will also continue to exist.
TPCI: What kind of synergies can be explored as e-commerce players and retailers plan to come together? What could be the mutual points of contention?
RA: Kirana shops can be extended arms for e-commerce players. These shops understand local needs better than professionals working with e-commerce players. Most of the employees of e-commerce players in grocery business are not so trained about the quality of grocery, while kirana shop owners have good skills in assessing the quality of grocery. Based on this competency, e-commerce players can use the resources of kirana shops for mutual gains. We need to facilitate a co-existence of e-commerce, organized retail and unorganized kirana ecosystem in our country. The growing size of the Indian retail market will provide sufficient attraction for all types of players.
The point of contention will come when e-commerce and local kirana shops target the same customer with similar offers. Crossing lines with each other will create losses for everyone. It is important that parallel lines need to be drawn. Kirana shops will be targeting customers who are not tech-savvy while e-commerce will target digitally literate customers.
TPCI: What technological interventions and operational changes can help kirana stores be in sync with the times, be more responsive to consumer needs and effectively compete with the larger players (online and offline)?
RA: Kirana stores need to understand that modern customers need a better experience. Not only experience, people also want a transparent transaction. There is a perception that local kirana shops are involved in malpractices such as weighing less, mixing of inferior quality products etc. Many researches show that customers are willing to pay premium prices for good quality products. Kirana shops can also use better flooring to keep the items safe and under hygienic conditions.
If possible, shops can also use low-cost IT solutions to properly maintain inventory. This will minimize the problems of dead stocks. Kirana shops can use low cost technologies such as use of Whatsapp or SMS to get orders from neighbourhood. These orders can be delivered to customers at the time of their convenience. If customers are ordering in day time from office and vans delivery after 6:30 pm in the evening, I think kirana shops can do it. They should also use reliable fintech applications to accept payments.
TPCI: What difference will joining hands with e-commerce firms play to the business models of these stores? Is this partnership headed for significant hurdles in the future?
RA: Everything is in transition. Kirana stores became back bone of supply chains during period of lock-down. E-commerce players were also not able to deliver during initial days of lock down. But e- commerce players have again started their deliveries. It will be in the interest of both of them to join hands and develop synergy. As already stated, they need to complement each other, so that both can co-exist. A large part of India is still living in villages. E-commerce players will always find it difficult to have deep penetration in Indian market.
There won’t be regulatory issues in promoting retail business in the country. Government needs to protect small kirana shops and also promote foreign investment in this sector. A balanced and proactive approach is needed to benefit all the players of the retail market.
Dr. Rajat Agrawal is a member of faculty at Department of Management Studies, IIT Roorkee. He is also associated faculty at Centre of Transportation Systems and Centre of Excellence for Disaster Mitigation and Management at IIT Roorkee. He is IPR Chair of DPIIT, Govt of India at IIT Roorkee. He is Co-PI and Cocordinator of Design Innovation Centre, IIT Roorkee. His research interests are Operations Management, Innovation, IPR and Indian Knowledge Systems.