With the onset of the pandemic earlier this year (damn, seems longer!), many of us found ourselves rushing back to nearby kirana stores rather than the giant retail stores. We rediscovered solace in the home deliveries on a phone call, settling monthly/weekly bills, and regular greetings from acquaintances at nearby stores behind masks. But apart from us, there are some more parties who have been visiting the kiranas for some time now - the leading tech firms and startups striving to make their mark in the online grocery delivery space.
India has over 13M kirana stores, that is 1 store for every 100 Indians. The kiranas alone account for 90% sales in the food and grocery segment.
In this edition, we’ll talk about why the kirana stores make an attractive opportunity, what are the different segments in this sector, and some of the problems that are looming over the sector.
Why Kirana Stores?
Indian retail economy is to reach $1.3 Tn in the next 5 years and is expected to grow at a CAGR of 9-11%. As per NSSO, the food and grocery make up 48% of this segment. This puts the market size of the grocery segment ~$400 Bn in 2020.
13 Mn kiranas form the backbone, commanding over 90% of the food and grocery segment. These small neighbourhood stores continue to be relevant in this space owing to familiarity, proximity, and monthly credit facility.
Well, market size, potential, and all that jazz are fine. The fundamental reason why everyone wants a pie of the kirana space is the vast network of these shops. They ensure last-mile delivery. Now, multiply the last mile capability with the 13 Mn shops spread out across India connecting 1.4 Bn people. This is the scale that everyone from Reliance, Amazon to Flipkart, and startups like Udaan, Khatabook, and Dunzo want to capture.
If not from us, take it from the world’s richest man. Bezos even stopped by one such kirana store during his highly publicized visit to India.
Replacing the kirana stores, which are deeply embedded in the Indian economy, is not possible. This is the very thing that these players have realized. So, they are finding different avenues to work and partner with the stores. Technology and scale is the biggest USP that these firms can offer to our nearest kirana shops, giving rise to a booming segment - Kirana-Tech.
The Digital Story
If you look around yourselves, you’ll find that there are numerous kirana shops that have been in operation for 2-3 generations. These are our traditional mom and pop stores. Nothing has changed in these stores in the past 2-3 decades. They still use cash. They still use pen and paper to keep their accounts.
Only 3% of kirana shops have been digitized. The digital story, thus, has just started.
A report by Bengaluru-based Redseer Consulting states that 3 out of 4 kiranas lack the exposure to any kind of tech platforms. The remaining 25% lag behind in tech-enabled procurement and payment processing. B2B businesses like Udaan, ShopX, Jumbotail, and NinjaKart, among others, have been pivoting kiranas in a big way and are significantly working with them on last-mile deliveries, maintaining supply chains, effective inventory management, credit, and more.
Maintaining hyperlocal inventories by the big players increases their capability to serve the customers satisfactorily by multi-folds. Unlocking the spaces like eB2B retail can deal with issues of intermediaries, delays, quality in the traditional kirana setup. Thus, the potential of transformation at each stage coupled with the market volume poses an interesting proposition to the big players in the traditional dukaan setup.
The Indian Kirana-Tech Ecosystem
The supply chain is confronted with a huge number of difficulties, like delays, wastage, unreliable payment mechanisms, leading to lost opportunities and clients. Stores are progressively receiving new advancements to guarantee practically zero disturbances in the supply chain, At the centre of this tech-driven method of working, is data science. Ecommerce platforms and aggregators are the key components fueling this change in the principal way that kirana stores work.
Introducing ‘Desh ki Nayi Dukan’ - Jio Mart
Reliance plans to digitize 40% of kirana stores by 2023!
Let’s discuss the elephant in the store. Mukesh Ambani has geared up again to bring yet another Jiofication in grocery retail with JioMart, the highlight being its deal with our beloved videshi player Facebook. Your local kiranas are awaiting a transformation with JioMart being the curator. With Facebook, JioMart aims to exploit the potential of 13 M stores, aggregating them end to end on the cusp of 400M Indians powered Whatsapp and India’s homegrown brand Reliance Retail.
Online grocery retailers have been able to tap only 0.2% of this 400 billion-dollar segment. Moreover, their presence in a limited number of cities reduces the modus operandi of connecting Indians in tier-2 and tier-3 with the power of curated experiences in grocery retail.
JioMart is offering the kiranas cheap credit facilities, nearly zero monthly payments for point-of-sale devices, deeper discounts, free no questions asked returns, easy sourcing from its branded Reliance Fresh, Smart channels, and much more. JioMart is here to spoil Indian customers and retailers with higher quality, low-cost, hassle-free options so that they can never gravitate back towards the traditional systems. Sounds eerily familiar right?
Jio delivered what the Indian telecom industry had failed to provide us for ages for a fraction of cost. Leveraging the same customer base of 400M+ Indians along with the easy interface of Whatsapp, JioMart offers endless possibilities. The payment feature which Facebook had been struggling to launch in India can be well integrated with JioPay offering closer synergies.
With a presence in 200 cities (BigBasket - 20, Grofers - 17), JioMart was clocking 400k daily orders (BigBasket - 280k, Grofers-190k) in August, just 3 months since it concluded its pilot.
This gives us every reason to believe that Reliance will indeed become Desh ki nayi Dukan.
The Catch in the Ecosystem
As lucrative as the humongous market size, immense growth opportunity and scope for multiple solutions to co-exist seem to the kirana-tech startups and companies, the shop owners are apprehensive about partnering with them. And looking closely, their concerns are legitimate. Firstly, for the shop-owners going digital means having a record of all the items that they sold. Currently, cash transactions allow greater flexibility in paying lesser taxes. And a digital ecosystem will make it hard for them to evade taxes.
But, the bigger problem here is the trust deficit. The retailers are hesitant to share their customer data, something which the startups want dearly. The kirana owners also fear that the startups are trying to replace them by digitizing their business. The recommendations provided by the digital portals can also promote their own products neglecting the local products and devoiding customers of ‘real choice’.
In order to woo the retail shops, many startups are offering their products and services at steep discounts. Khatabook, valued close to $300 Mn and ~1M daily active users, has no revenue source at present. Udaan lost 17 rupees per every 1 rupee of revenue in 2019. It is valued at 460X of its revenues!
Since the sector is gaining momentum and size, government regulations will also be needed which safeguard the interests of both small businesses and consumers. The digitization story won’t happen overnight. It will take time for the firms to gain the trust of the kirana owners. In the process, some startups might need to revisit their business models in tandem with the needs and aspirations of shop-owners.
We don't want to push our ideas on to customers, we simply want to make what they want - Laura Ashley
Whatever is the case, two things remain certain - it’s the most exciting time to be in this space and Reliance is all set to make another disruption!
This article has been written by Payal Garg and Shivam Jindal. Check out Business Bar for more such interesting stories!
Around the Web in 8 Stories
Here’s a very good, detailed presentation on how The New York Times went from a struggling print publication to a profitable digital media organisation - The (Not Failing) New York Times
Siri married Alexa and had a honeymoon in Vienna. That’s right! Last year, EuroPride put together the first AI marriage between the two popular voice assistants to promote the pan-Europe LGBTQI+ event. Talk about attention grabbing headlines!
Disney and Integrators versus Aggregators - Disney's reorganization reinforces their integrated strategy; there is a lot to learn for anyone competing with Aggregators
For 4 years since its IPO, Snapchat has been the butt of jokes on Wall Street. The company, losing cash by the boatloads, was struggling to find a credible use case. COVID struck and teenagers, unable to hang out in person, were back at it. The company reported 52% growth in revenues last week. Comebacks are real!
Every successful business goes through the famous S-curve, and most companies, and their investors, spend a lot of time looking for that inflection point towards hockey-stick growth. But how does one deal with flattening of growth? Read this looong, but brilliant piece on invisible asymptotes and how to tackle them
Check out this compilation of 25 moments in tech from the last 25 years. It coveres everything from the obvious (Steve Jobs unveils the iPhone) to the obscure (AT&T stops charging an hourly rate for internet access)
Go-Jek may be based in Southeast Asia, but the multi-billion-dollar ride-hailing firm continues to tap India for engineering talent. Here’s a case study on how Go-Jek has aced employer branding through their creative billboards
This Mercedes ad featuring The Weeknd is a masterpiece. It showcases Mecerdes’ rich history and the final shot “It’s more than electric. It’s a Mercedes” asserts Mercedes’ arrival in the electric car category in style, long after Tesla made it ultra-cool
Find us on Instagram, LinkedIn, and Twitter.
If you like what you read, please share and subscribe to have Funnel Vision directly delivered to your mail.