Courting kirana stores – Tech giants and startups that are changing Indian retail

India’s grocery market is worth a sizeable $400 billion. But even with rapid retail growth, kirana or mom-and-pop stores remain central to grocery sales in the country. The fragmented retail market has about 12 million small groceries, and modern trade accounts for only 10 percent of retail trade.

The small shop challenge in India

India, like most emerging markets, has a long supply chain with many intermediaries and middlemen driving up prices. For retailers, there is limited price visibility in the wholesale market, and buyers are often unsure if they pay a fair price for a product.

With limited cash flow and space for inventory, kirana stores are dependent on wholesalers or distributors that understand their needs and provide credit. However, their close working relationships with distributors often come at a price, as stores are often stuck in a credit-trap with one of two distributors — making shopping around for the best deals difficult.

A long supply chain and limited infrastructure also create wastage in the system. Research has shown a 10-15 percent wastage in cereals alone — because of a lack of storage infrastructure and primitive grain handling methods. It estimates fruit and vegetable wastage to be greater than 30 percent — and poor handling and limited cold chain facilities are often to blame.

India’s small groceries are mostly untouched by technology. Ecommerce in the country accounts for only 3 percent of sales, even with Amazon, Walmart, and Flipcart investing billions of dollars in the industry.

However, changes are taking place in traditional trade in the country. The retail sector is becoming more digital, and traditional stores are more willing to adopt technology — especially in big urban centres. According to a RedSeer report, almost 70 percent of kirana stores in big cities and 37 percent in tier II towns are prepared to use technology in their stores. Even in traditional markets, there is a greater acceptance of digital payments, and a uniform taxation system through goods and services tax (GST), has proved to be a big boost for ecommerce companies.

Mobile technology is also fuelling ecommerce, and India will have around 800 million smartphone users by 2022, according to Cisco Systems. Companies see an online-to-offline retail model as an engine for growth — and the modest kirana store could be an important player.

With a vibrant startup community, the country has become a hotbed for entrepreneurs trying to connect with India’s unorganised retail sector. From small startups to big players, such as Reliance, Flipcart and Amazon, have all entered the arena looking to leverage kirana’s large footprint and close working relationships with customers. Below are several players reshaping the country’s traditional trade:

Udaan operates a B2B marketplace that connects micro retailers with distributors, wholesalers, and traders. The platform not only focuses on packaged goods, fruit and vegetables, but offers a wide range of categories from lifestyle, electronics, and toys. It provides a nationwide supply chain network and has connected over 3 million retailers and 25,000 sellers across 900 locations.

Reliance Industries plans to create an online-to-offline e-commerce platform — connecting kirana stores to its network. The retailer has 15,000 digitised retail stores active and wants to expand its retail presence to over five million in India by 2023. It plans to install its Jio mobile point-of-sale (POS) device at kirana stores and connect it to its high-speed 4G network. Shops can use the Jio POS system for placing orders, scanning barcodes, billing, facilitating credit card payments, and calculating goods and services tax.

Amazon announced earlier in the year that they partnered with more than 20,000 kirana stores in India — using them as fulfilment centres to store and deliver goods. Amazon piloted the program dubbed “I have Space” years ago, and has partnered with stores spread across Tier 1, 2 and 3 cities.

Jumbotail operates a marketplace that connects kirana stores with brand owners and traders. It offers a range of services including supply chain logistics, a mobile app for placing orders, integration with point-and-sales devices, and credit solutions to shop owners that can’t easily get loan from banks.

Gully Network provides a tech-enabled platform for small groceries or kirana stores that takes care of the entire supply chain — including sales, automatic stock replenishment, finance and merchandising. It also helps owners modernise their store and transform them into an omnichannel and tech-enabled store.

Flipkart has invested in Bangalore-based startup ShadowFax — who works with kirana stores in 300 cities and using their shops to store inventory and tapping into their large network of freelance delivery men. This model leverages the local knowledge of kirana stores — allowing for fast neighbourhood deliveries.

ShopKirana focuses on the distribution of goods to kirana stores in small towns and cities, and a store modernisation program under the Need Square brand. The startup also runs a supply chain platform that connects retailers directly with brand owners.

Bengaluru-based mobility startup Yulu has partnered with around 150 kirana stores — helping charge the startup’s swappable batteries. Yulu equips stores with lightweight and compact charging equipment the size of a refrigerator.

Walmart-owned payment company PhonePe has partnered with 9 million local neighborhood stores across India to facilitate digital payments using QR codes. The startup is working with 500,000 stores — functioning as ATMs for PhonePe users. Users can transfer money to a store owner’s PhonePe account — and collect the cash in the store.

SnapBizz provides grocery stores with a cloud-connected business platform that includes a tablet, barcode scanner, printer and a consumer-facing LED display. The technology enables merchants to manage their billing, inventory, and offers consumers real-time promotions —using the LED display.

Goodbox’s platform helps kirana stores connect with customers through a mini app concept. A mini app is like a regular app, with functionality that includes messaging, displaying products, pricing, and a built-in online payment gateway.

Khatabook helps kirana stores track transactions and feature a ledger system, reminders and alerts linked to upcoming payments. Stores also facilitate payments.

Notable mentions include: Behtar Stores, StoreKing, FIA Technology Service, OkCredit, GoFrugal, MaxWholesale, and NeoMart.

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