Future Of The Local Kirana Is Destined To Be Bright

Over the last decade, the epitaph of the local kirana store has been written multiple times. With channels like modern trade and e-commerce being set up along with innovations like cash on delivery, home delivery at particular slots, there were concerns amongst the local kiranas that India might be heading the way of the western economies where unorganised trade constitutes less than 20% of the overall channel. Despite all the hype and hoopla surrounding modern trade and e-commerce , general trade, comprising 6.65 million local kiranas constitute about 85% of the channel (key categories being food, home care and personal care) with modern trade and e-commerce constituting the remaining 15%. While the local kiranas have done an outstanding job over the lockdown period, it is likely that this channel will continue to remain the primary channel for FMCG purchases even during the next decade. This article looks at the primary reasons for this likely channel domination.

The functional benefits which the local kirana store offers is unique to a country like India

The local kirana store offers convenience in a country like India where population density is high, lanes are narrow, parking slot is difficult to get and traffic jams are high. In addition, the added benefit of familiarity, trust and home delivery at odd hours is highly valued. Categories like fruits, vegetables and meat, where freshness accounts for a lot, makes the local kirana a preferred channel for purchase. For instance, despite the growth of e-commerce, there are perceived hygiene issues with delivery boys and operational challenges especially during the lockdown which are likely to remain over the next few quarters. Also, grocery shopping serves a social experience as residents take a relaxed evening stroll to purchase a few items.

In similar countries, unorganised kiranas are still the primary channel for key FMCG categories like food, personal care and home care

Countries in which organised trade (modern trade and e-commerce) dominates comprise of wide roads, systematic traffic, low fuel costs, ease of parking availability, moderate population density. Hence, countries like the US, Australia and UK have an organised share in excess of 70%. However, in countries similar to India - namely Indonesia, Philippines, Bangladesh, unorganised trade (local kiranas) are in excess of 65%-70% and are likely to be in that region. Given that the nature of roads, population density and traffic is unlikely to change any time soon, the local kiranas will continue to be the preferred choice of purchase.

Alternate Go to Market models with the local kirana as the lead protagonist are bound to make this channel more efficient and attractive

The local kirana store has been at the centre of innovation over the last 2 - 3 years and is expected to be the centre over the next 5 years. It has been an active participant in organised wholesale platforms from farmer to kirana (e.g. Jumbotail serving 24,000 kirana outlets). In addition, it is now a part of organised platforms like Jio Mart, Local shops on Amazon where end commerce between local retailers and end consumers is enabled. Leading FMCGs have actively pursued the local kirana to do deliveries to end consumers (e.g. My Kirana by Unilever). In addition, numerous startups have installed point of sale machines at thousands of kirana outlets to drive technology led analytics.

The lobby of retailers is an incredibly powerful one and will ensure government regulation is always on their side With 13 million retailers, of which 6.65 are local kiranas, this community forms a significant voting and electoral lobby. Hence, any government, at the centre or state, will be cognisant of their aspirations and livelihood and will avoid taking any legislation that supports an alternate channel like e-commerce. For instance, there have been policy guidelines against steep discounts on e- commerce platforms, exclusive selling agreements and limiting sales of products of companies in which the e-commerce company has a stake in. Or in more recent times, e-commerce players were not allowed to sell non-essentials to keep them on par with the local kirana. This trend is likely to continue where central and state governments are likely to back the local kirana through regulation.

The impending modernisation of the local kirana store will make it a pleasant shopping experience

With all the hoopla and the technology investment going around, it is interesting to visualise the form the local kirana might take. Over the last 3 - 5 years, leading kirana stores which were less wholesale oriented and more end consumer oriented, had started revamping their stores into the self-service format (a small supermarket). Over the next 3 - 5 years, this journey is likely to be accelerated with integration of buy online (e.g. from Jio Mart) and collect offline at the store and the availability of multiple technology enabled payment mechanisms along with platform oriented loyalty program hosted by Jio, Amazon or even Unilever. A similar upgrade is likely to be witnessed at wholesale oriented kirana stores but with greater experience on technology led payments, loyalty and inventory control rather than pretty interiors.

In conclusion, despite the naysayers, the future of the local kirana store is bright. This prophecy is basis our incredibly high population density, cultural association of the local kirana with trust and convenience, the impending modernisation of the local kirana and robust government support.

So the next time anyone tells you everything in FMCG is moving online and towards modern trade and the local kirana is going to be extinct, ask him to visit the local kirana near his house and let him evaluate it for himself.

Sandeep Das

Guest Author The author, Sandeep Das, is an MBA from IIM Bangalore, a management consultant, the author of “Yours Sarcastically” and a columnist.