Coronavirus resurfaced Kirana stores, right Tech Ecosystem would make them thrive

The Covid-19 outbreak has reconnected many to their friendly neighbourhood Kirana store. When essentials are priorities and movement is restricted during lockdown, the nearby Kirana stores are playing a major role in filling the demand. Scheduled E-tailer deliveries have started for groceries but the convenience of quickly getting your needs amidst uncertainty cannot be beaten. Covid or no Covid, Kiranas were not going anywhere; the pandemic just brought the focus back on the massive Kirana opportunity lying in the country. Read on to find why the Kirana store works in India and the components of a Tech Ecosystem required to modernize a Kirana store.

Background and Context

With the advent of e-commerce in India, there was a narrative in the media about the death of small merchant kirana stores. Who can compete against the corporate might with deep pockets and even deeper technology and the ability to woo customers with much superior user experience and discounts? But a decade later, unorganised retail constitutes over 90% and unorganised grocery retail contributes over 99% of retail market share. Retail economy in this nation is expected to reach close to 1 trillion USD by 2022, with a compounded annual growth rate (CAGR) of 9–11 %. It is estimated India has around 12 million Kirana stores; some estimates put the numbers even higher.

In a largely entrepreneurial economy, the majority of the population is directly or indirectly related to retail business. This article is not of either e-commerce or offline retail in India, but of technology-led growth in multiple models of selling, serving a diverse and large population with varied consumption needs.

The new narrative in the media now is to work with and enable Kirana stores by corporates with deep pockets and even deeper technology. All sorts of companies from big FMCG to Retail giants to e-commerce tech, Fintech and new age startups realise this and have been trying to get Kiranas onboard by solving problems associated with retail such as sourcing, inventory, payments etc. There are certain aspects to Kiranas which cannot be replaced by just online commerce models. Let us look at some of the aspects native to Kirana sale in the light of Grocery Kirana retail.

• Instant gratification
• Small ticket purchases
• Faster deliveries
• Credit purchase
• Store for all
• Reach
• Choice for all
• Trust and connection

Instant gratification

When you need something urgently, for instance if you are about to cook and find the spice is over or crave for a snack, it is possible to get it instantly from the small store in your community or the kirana store just outside. There is no alternative to it.

Small ticket purchases

When you are in need of just a few things, maybe an item or two, you do not go into a supermarket or order online which is time consuming. Besides the shipping fees on online order may not warrant for the small value purchase. In such scenarios your neighbourhood Kirana store is a natural choice.

Faster deliveries

Even if you call in for home delivery, the nearby Kirana store is still the fastest and they mostly provide free deliveries.

Credit purchase

Many of Kirana stores give credit to their customers. Either due to the needs of some of its customers or just a simple convenience at checkout. Though this is solved by few fintech companies also with Pay Later kind of options, but the credit is limited to credit-worthy people as per their credit engines.

Store for all

A Kirana store is for one and all, from a migrant labourer to the fancy apartment dweller. While e-commerce still has its limitations with tech savviness or vernacular and big box supermarkets are still just fancy to many others.

Reach

Wherever there are people there is a Kirana store nearby, counting over 12 million. E-Commerce deliveries though are spreading far and wide, are not for everyone and also have limited coverage in tier 3, 4 cities and rural areas.

Choice pickup

For the fresh category specially, you have the option to touch, feel and smell, ensuring the best purchase for yourself.

Trust and connection

Often Kirana stores are family operated with the owner and it’s family personally managing it. They form a bond with their customers. People visiting these stores have been doing so for years and their taste and preferences are well known to the owner.

In spite of all these aspects advantageous for the kirana stores, you hardly find their business expanding. That’s because from a customer’s perspective Kiranas are not a preferred choice for buying for the lapses in the following aspects:

• Selection
• Quality Standardisation
• Discounts
• Inventory Visibility
• Modernization

Selection

Kirana stores are typically of small areas, from 100 sq ft to 500 sq ft range. Limited space means limited variety, so their selection is limited. They have few brands only and ‘stock unavailable’ is a frequent problem. Also they have only the ‘fast-moving’ products, any other type of exotic or premium products are not part of their assortment.

Quality standardization

Kiranas often face challenges with consistency in quality especially with certain products like fresh and staples. Kirana owners mostly source these products from ‘mandis’ or wholesellers where they get what is available to them at the best price. They do not have much hold in quality standardization of these products.

Discounts

Kiranas unlike big box retail or e-commerce are unable to provide discounts on bulk purchase to its customers. This is a major reason for Kiranas not being the preferred choice of shop for monthly household purchases. They have small turnovers and do not deal in huge quantities to demand greater discount during sourcing. In addition, they deal with distributors and middlemen for their sourcing, which eats into the margins.

Inventory visibility

Customers do not have means to know availability of items in their nearby store unless they visit or call the store. Sometimes the Kirana store owner himself does not have clear inventory visibility and needs to search for items.

Modernization

Many customers today have developed certain expectations from a store when they go out. It could range from the overall aesthetics of the place with neatly put up shelves like in big box retail or clear availability of information like promotions, new items etc or simply availability of multiple digital payment modes. Many Kiranas stores are adopting the practices backed by tech companies but a lot needs to be done here.

Tech Ecosystem powering a modern Kirana store

The Kirana stores are very much ingrained into the retail fabric of this nation. The need is to bring them up to their full potential in sync with modern technology. The right kind of ecosystem needs to be in place to achieve maximum value out of them. It has many components and many tech companies are already working towards solving them, building up the stack which is a full scale B2B2C model. Any tech company which solves more pieces of the puzzle and owns more of the ecosystem would control the huge Kirana opportunity.

Ecosystem components

Sourcing

Sourcing is one of the biggest pain points for any Kirana store. Even a 100 sqft kirana store can have over 500 SKUs (stock keeping units). Multiple SKUs are sourced in multiple ways, often consuming most of the time and energy of the owner and his family over a single store. Easy sourcing with the right quality and price, is very much needed for Kirana business. It would also lead to lean inventory at Kirana store thereby helping in working capital.

The tech suite involves easy online ordering by Kirana store via app or desktop, timely and consolidated delivery for all categories to the storefront. It is like a B2B online marketplace with brands/distributors, wholesalers, tie up with Mandis or the tech companies own brands on the supply side.

Inventory

This refers to supply side inventory, supplied to the Kirana stores. To solve the above sourcing problem companies would need to make sure they can provide each and every item which a Kirana store needs. For a grocery Kirana store it would mean, FMCG products, Staples, Fresh (meat and vegetables), Dairy, Condiments, Snacks and Beverages, Cleaning products, Packaged foods etc.

This means the supplier would need to manage inventory effectively and maintain the service levels to Kirana stores. Like most e-commerce, the majority of the inventory is controlled by the company for better service and efficiency. For this they provide space to wholesalers/distributors in their warehouses to keep inventory so that they can use their own tech to manage and fulfill orders quickly in an optimum way.

Logistics

With the above two components of sourcing and inventory sorted, the next logical component is logistics. For the daily movement of goods from the warehouses to Kirana stores, a complex logistics infrastructure is required. Orders placed by the Kirana store need to be delivered in a timely manner, in a consolidated shipment, with quality and integrity of items maintained.

Many companies invest in building their own fleet to control service,use third party logistics,or a right mix of both.

Fintech

This is a major component in itself and many companies are operating only in this space. There are multiple pieces at work here.

• Payment solutions — Merchants can pay for the goods received by them by various payment methods. It may range from multiple digital payments like credit cards, debit cards, wallets, UPI, QR codes, and EMIs. Or it could also be a combination of cash and multiple digital payments. Pay later within a certain period is another facility being provided for rolling a business
• Loans — Many Kirana stores do not get loans for business from traditional channels like banks. They would end up taking loans from the market at huge interest rates. The tech ecosystem having access to Kirana sales and expenses have enough data to know the ability and intent of the store to pay back and can effectively use it to underwrite
• Insurance — A whole range of insurance products can be provided from shop and material to personal insurance for staff

Above components were related to the supply side of the Kirana stores. Another big part of the puzzle is to solve the Store management and modernization.

Kirana POS system

Many companies are eyeing this space where a full fledged POS system is provided to the store to take care of complete operations and management.

It is basically a tech suite required to successfully run a business. Here are its components:

Order management

This system takes care of the Order creation and life cycle. Ecosystem provides Kiranas to take orders offline (in-store), online via integration with B2C marketplace, Hyperlocal delivery platforms, telephonic via calls or whatsapp or though a sales call center; basically it is a multi-channel order management where all orders are captured in one system. Order and its shipment lifecycles are maintained with handling of returns, cancellations and payment status for the order. The system does billing and generates invoices which can be a physical copy or sent via email, SMS to customers.

Inventory management

This refers to in-store inventory management where the store owner has a clear picture of all inventory ordered,in-transit, in-store, reserved, or out of store and stock-outs. Stores can create a complete catalog with prices of all items ,update attributes, and quantities as the item is in-stock or is sold. The same can be published on any platform where customers seek information.

Payment

As mentioned earlier on payments, the Payment module is a suite of payment methods where the Kirana store can accept multiple payment modes with combination of two or more modes for single order. They have ability for collections from customers by sending payment links to customers. They can also create open expectations and give credit to loyal customers.

Customer relationship management

Kirana stores have the advantage of personal connection with its customers but at the same time they lack modern means of engaging and incentivising customers. The tech suite can enable Kirana stores and provide CRM tools used by big box retail like:

• A customer loyalty program where customers get points based on purchase which can be redeemed on next purchase
• Transaction related promotions
• Buying suggestions are provided
• Customized notifications being sent to all types of customers from high spenders to less frequent visitors
• Store notifications for special sales or festive events, etc
• Customer feedback and review is captured via different channels

Promotions and Marketing

Kirana stores lack tools of promotion or marketing of their store and products. The tech companies can solve the following Promotional and Marketing module’s features effectively:

• Email / SMS marketing to existing and new customers in their area
• Creation of campaigns for events
• Offers and discounts management
• Content creation and publishing to the right audience via social media or other online / offline channels

Delivery

Even today many Kirana stores provide delivery to their customers but they have limited range and means. Getting delivery orders via multiple channels, fulfillment and delivering can be facilitated with the help of ready tech. Managing delivery orders via system, integration with Hyperlocal or B2C marketplace delivery in addition to their own delivery, would boost the sales.

Accounting

Accounting is another area where Kirana stores suffer. It is necessary not just for tax and compliance purposes but also to have a clear view on their own business in terms of overall revenue, expenses, income and cash flow. A ready accounting suite with integration to TP softwares like Tally would solve their accounting and return-filing needs.

Reporting framework

For all the above pieces a common reporting framework is required to provide visibility to the Kirana store on business. It would provide standard and customized reports. Reports can be at multiple levels from detail to summary and can be sliced to produce specific information for example day / month/ item wise sales etc. Some basic reporting helpful for a Kirana store would be on Sales, Orders, Discounts, Items, Payment, Tax and Customers.

Intelligence

With all the data flowing in the ecosystem, a business intelligence suite is natural and necessary. Data can provide a lot of patterns and predictions in business. For example, Kirana stores often struggle with stock — From visibility to out-of-stock to stock lying dead for months. The system can help on multiple fronts from prompting to reorder items to fill stock; prompting for promotion to clear dead stock or soon to be expired stock.

It can combine with other data to find sales patterns for example as per seasonality or specific events like festivals and suggest stock-up. It could also suggest sales bundles or items which go well together. Based on customer and transaction history, it can prompt multiple suggestions for promotion and notify customers as per customer behaviour. There are endless applications when data is used wisely and could help a small Kirana shop to do big business.

Suggestions to Kirana Store Keepers

Besides this many other suggestions can be provided timely to Kirana stores to help in business growth like how and what kind of items to be displayed in the visible range of customers, promotion suggestions with banner placements, overall aesthetics of the shop irrespective of the size, how it can be made pleasing and attractive, right kind of lighting and colors for the store, handling peak demand and operational tips etc. In the current pandemic situation, information and guidance related to best practices to remain Covid safe could also be a necessary suggestion

As a last note, Kirana stores use a lot of hardware like billing machines, printers, scanners, weighing scales etc. The tech companies can provide such equipment and also other latest technology helpful in the working of the store.

Conclusion

The future looks more promising for Kirana business now, than it was a few years back. A hybrid model of offline and online would be best suited for the retail economy and Kiranas are going to play a major part in it. This is the most exciting time for Kiranas as there are challenging problems to solve, something on which tech companies can thrive on.

Get ready for the new age friendly neighbourhood Kirana store!