Kirana Store in India has been an integral part of the conventional brick and mortar system of retail and has downsized because of online retailers. India has been under the biggest economic lockdown for nearly a month now. Around 1.3 billion Indians are now homebound, observing social distancing measures, to help combat the deadly COVID-19. While the virus continues to claim precious lives, the Government is trying its best to keep the economy up and running by constantly eliminating Supply-side blockages. While economic indices continue to take their toll on the economy, wiping wealth off the country’s billionaires, your local Kirana shop owner continues to mint money like never before!
The online retail grocery businesses coupled with the Organised Retail Grocery sector usurped recklessly into the localized business’ territories. The Indian grocery market was scheduled to touch $10.5 billion by 2023. As of October 2019, Bigbasket had over 1,00,000 daily orders while Grofers managed around 40,000 orders a day, which is massive! The majority of an individual’s retail spends (around 35-40%) was from online channels, while 30-40% were from localized Kirana shops. With the growing popularity and growth in the volume of resources available at the perusal of the former, the numbers continued to beam in favor of alternative sources of grocery procurement. This continued until the devil of the entire economy emerged as the savior for the dying local grocery businesses. The result – the COVID-19 pandemic has brought local Kirana stores back in the game.
Failure of online retailers
Over 90% of the Retail sector in India is unorganised. Thanks to the Covid-19 lockdown, the local kirana stores in various Indian locales have become the lifeline of the economy, assisting the easy availability of essential commodities. A basic question that arises at this juncture relates to why online businesses are facing the market heat? The lockdown should (in sharp contrast to the actual scenario) be offering an obvious encouragement to individuals, to stay indoors and order groceries online. It must be noted here, that there are two aspects to facilitating a transaction between businesses and the consumers – a). Demand-side factors, and b). Supply-side factors.
While the demand side factors offer a favourable environment to the online retail and hypermarket grocers, the Supply side factors fail to contribute equally. Demand-side factors include the Government-imposed lockdown forcing consumers to stay indoors, which offers great encouragement for online shopping of essentials. On the other hand, Supply-side factors include a host of other activities, which enable businesses to supply goods and services to their end-users. The supply side factors that led the failure of online retailers during the coronavirus outbreak are as follows:
The largest cause of failure of the online retail market in India currently, is the dearth of labour. Due to the Covid-19 outbreak, and with local labourers shifting to their native towns/villages, e-commerce companies have been facing a major manpower shortage. BigBasket planned to hire nearly 10,000 new employees on a permanent basis, while its rival Grofers also stated that it planned to hire nearly 2,000 additional workers to overcome the manpower crunch.
Another key hurdle being encountered by online retailers is Logistics. There were reports of several trucks and delivery agents being stopped (even beaten) in the States of Uttar Pradesh, Maharashtra, Karnataka and Telangana. Warehouses were also forcefully shuttered by police and local authorities despite the Ministry of Consumer Affairs’ clear instructions that ecommerce firms, their warehouses and logistics facilities, wholesalers, vendors and delivery partners be exempt from any type of prohibitory orders.
Image: Logistics emerges as one of the key contributors to the failure of online retailers
Difficulty in interpretation of Government orders:
The above hurdles lead us to another important and rather shameful supply side hurdle – Difficulty in interpretation of government instructions. Government officials acting in clear contravention of the notifications and instructions being issued by the Government caused unwarranted blockages in the movement of supply vehicles and agents. This caused major revenue losses to online retailers.
Catalysts to the success of Kirana Stores
Image: Analysis of the availability of essential goods at kirana stores
The localised kirana stores sell a wide cornucopia of products. Kirana stores form the lifeline of Emerging Market economies, where food-shopping habits are largely localized and deeply entrenched. Customers mostly prefer to prepare their own meals and are accustomed to shopping at open-air market stands or small neighbourhood kirana stores that offer a smaller, but familiar range of fresh food and household staples.
Local Indian Kirana stores have experienced a major boom in business ever since the start of the Covid-19 lockdown. Various local grocers stated that they have witnessed a sudden rise in demand for local kirana goods. A McKinsey report stated that groceries purchased from grocery stores during the lockdown has gone up by 53%. The following primary reasons for the sudden jump in sales of local kirana store owners may be reckoned:
Link with unorganized sources of procurement:
Emerging market retail businesses are characterized by a fragmented supplier base. Effective procurement includes purchasing goods from a complex network of retail and local entities. Local kirandars (kirana store owners) excel at this front. Hopping from one distributor to another and physically picking goods from warehouses helped them cut logistical problems, as against their online counterparts.
Convenience and innovation:
Kirana shops are situated at the closest and the most convenient locations. In light of the Covid-19 crisis, a large majority of kirana shops also began doorstep deliveries and accepting of orders through Whatsapp. Shop owners helped customers exercise caution during shopping, by chalking out circles at requisite distances. The Bengaluru civic authorities also came up with a BBMP (Bruhat Bengaluru Mahanagar Palike) helpline, to help customers opt for doorstep delivery of groceries.
Concern for hygiene:
The Coronavirus outbreak has led to increased concern for health and hygiene among individuals. According to a McKinsey report, availability of hygienic services at the stores has been the first preference of over 50%, while 38% gave more preference to the assortment available at the store.
Unreliability of online channels:
A large number of individuals stood aggrieved with the uncertain and frequent cancellation of online orders. In the events of panic buying and hoarding of essentials, online grocers capped grocery purchases and also reduced the items available, citing labour and logistical disruptions.
Spending increases during the coronavirus lockdown are largely concentrated in groceries and household or personal supplies, thus offering an obvious impetus to the local grocers.
Image: Spending increases are largely concentrated in groceries abd households or personal supplies
The Future Of Online Retailers and Kirana Stores
The McKinsey Report suggests that 29% shoppers have shown intent to go back to their old neighbourhood kirana stores, even after the pandemic subsides. The demand for large format modern retail supermarkets dipped by 5 per cent, and the report says that post the pandemic there could be an 8 per cent increase in shoppers. It is also anticipated that that there shall be nearly a 48% growth in consumers buying grocery to cook at home.
The important factors determining the selection of stores over the course of the foreseeable future would be stable availability of fresh food products (39%), store location (39%) and number of shoppers in the store at a given time (38%). Shoppers have also expressed intent to shift from buying branded products sold by hypermarket chains and online retailers, to non-branded products sold by the local grocers.
Irrespective of the future outlook, the lockdown has made it abundantly clear that local businesses have a way around obstacles that larger businesses do not. Whether it is the procurement of goods from informal channels, or working with limited logistical support and dealing with government authorities, local businesses have a street-smart approach that bear the potential to topple even the innovative businesses off their leading spots.
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