The Kirana Store Revolution

~Harshita Kapoor and Manan Grover

Introduction

In India's ever-changing retail scene, there is one standout: the Kirana store. These small convenience stores, strategically nestled within the fabric of everyday life, have seamlessly become an integral part of towns all over the country. These establishments are deeply ingrained in consumer life, making them essential centers in the web of national trade.

Market Analysis

India's retail market was worth an estimated $883 billion last year, of which grocery retail accounted for $608 billion. Kirana stores remain a dominant force in the country’s retail sector which accounts for 8% of the country's labour and roughly 11% of its GDP. These stores constitute a significant portion of the market, representing over 75% of total consumer goods sales in India and 90% of the Indian grocery market. Over 90% of FMCG sales in India happen via these small stores. According to industry estimates, there are roughly 15 million Kirana outlets in the country, showing their widespread presence. Hence, Kirana stores are undoubtedly the lifeline of India’s retail market.

The Kirana Edge: Why are Kirana stores still relevant in India?

Many big brands, including DMart and Reliance, have made names for themselves in the industry. At times like these, one might wonder why the age-old Kirana stores are still relevant in the country. Here’s the answer, 

• One significant advantage of Kirana stores is their ability to offer competitive pricing. These stores often have lower overhead costs compared to larger retail chains, allowing them to offer products at affordable prices. Kirana shops thrive on unmatched trust. The local, familiar owners foster accessibility and loyalty.

• Long before FMCG brands embraced sachetisation, these stores provided precisely what customers needed, from 300 gm of spices to 3 biscuits. It's easy, affordable, quick, and highly customizable. One of the key factors that set Kirana stores apart is their strategic location. These stores are strategically nestled within residential areas, making them easily accessible to the local population. They are often located within walking distance of homes, ensuring convenience for customers who prefer to shop for their daily needs regularly. 

• Through their informal customer analysis, the owners of Kirana stores have been able to fulfil the highly nuanced requirements of Indian customers successfully. These store owners provide a credit facility known as the Khata System, with no interest charged making them an ideal choice for shoppers nationwide.

Increasing competition- The Challenges faced by the local dukaans

The shift in consumer shopping patterns towards online and modern stores has impacted Kirana stores, with their trade share expected to reduce to 75% by 2021. Challenges include a lack of modern retailing techniques, credit issues, and reduced footfall due to e-commerce. Organised retailers like Big Bazaar and Reliance Fresh are gaining popularity due to factors like rising labour costs and increased disposable income. Kirana stores face constraints such as inadequate resources, space limitations, and poor management.

Global Giants Empower Local Heroes: Big Names Join Forces to Boost Local Retailers

Modern retail, driven by mobile internet and unified payment interfaces, is transforming Kirana stores into significant growth channels. Major players and startups like Hindustan Unilever, Reliance Industries, Walmart India, Kirana King, and PhonePe are initiating partnerships to modernize Kirana stores. In 2020, Google announced a $10 billion 'Google for India Digitisation Fund,' and Amazon plans to invest $1 billion in onboarding small and medium businesses online.

• Reliance's JioMart connects customers with local Kiranas, acting as a bridge between offline and online retail. 
  

• Walmart's Flipkart Wholesale supplies Kirana stores, while Amazon's "Local Shops" initiative enables Kirana retailers to sell on the platform. These initiatives aim to digitise operations, enhance customer engagement, and manage inventory effectively. 

The impact of Modernization on the economy

Accenture's study reveals revenue growth of 20-300% and profit increase of 30-400% for transformed Kirana stores. Modernization benefits the economy by boosting rural consumption, expanding the formal retail economy, increasing tax contributions by 50%, and creating an estimated 3.2 million jobs. With collaborative efforts, the future of Kirana stores is envisioned as connected, digital, and engaging.

How are these small stores eagerly bringing the change?

Kirana stores in India are experiencing a significant transformation as they adopt modernization strategies to meet the changing preferences of consumers and maintain their competitiveness. Adopting digital payment methods, such as mobile wallets and UPI, not only improves customer convenience but also promotes a cashless economy.

Conclusion

Digitization and modernization can transform traditional neighborhood shops into dynamic, tech-savvy hubs. Embracing digital tools and streamlined operations, these stores thrive and enhance customer experience, showcasing the adaptability and resilience of small businesses in the face of modern challenges.  Many Kirana stores embraced digital payments using platforms like Paytm, indicating a willingness to adopt modern digital practices. While only 3% of Kiranas had adopted technology in 2018, now 70% in urban areas and 37% in tier 2 cities are ready to incorporate technology for business expansion.