Turning Point in Grocery retail after 2013 when the first time Future Group thought of opening new franchise Grocery stores in Rural or Semi-Urban Areas. Though retail is witnessing significant development in the coming days amid the entrance of big retail players. Such events are not only happening in Kirana but also having at market places whether it is physically available or virtual.
Still, some people are thinking to open retail chain as 7eleven has in US and Japan, Some are thinking of Zoon in UAE, and many more want to operate it the way it is being operated in the US and another developed world. But, before that, we need to go deep and understand what India is? Think about it, you need need to visit whole India, its cities, villages or urban or rural areas, you just explore Retail market in " Delhi", Mumbai or Kolkata" you will see the diversity. Once, you see and analyze data from these places, you will understand how different is Indian retail and what kind of difference is there.
In Delhi, you will find Rs. 1500 per month/family in most of the Trans-Yamuna area, even in there, you will find that Laxmi Nagar and Preet Vihar area has more buying power than the nearby Nand Nagari, Baljeet Nagar, Shahdra area. Same is in Central Delhi where an average basket size is Rs. 10000/- per month for a family with a great diversity in merchandise whereas in the slum areas there is more pressure on staples. Same is with Mumbai, where Andhri, Kandiwali and East part of most of Area till Church Gate has a different buying habit than comparing to West side of areas. Even I have seen in new Bandra where a family has Rs. 15000 per month ration. There is a different kind of diversity, which is really not even easy to understand and workout. One side of Road has a high-end area and another party a slum.
How one can compare the American retail market. A consumer living in high-end cities has a routine buying habit where they mostly depend on hypermarkets nearby them.7eleven in New York has uniformity in assortment but when it moves to California, assortment change only 20% or 30%. Same is in Japan, most of the people have the same food habits, so there is no significant diversity in product assortments but here in India situation is different. Every state has different Language, customs, colour, creed, caste and Food habits. For Example, A south Indian when he moved to North India for Business or on his deputation or employment he always prefer to have south Indian Food in his daily routine. He will hardly eat north Indian Food because of his food habits. Same is with North Indian people when they moved to South Indian areas they are fed up with Idli Dosa, Utpam and anyhow want to have Chapatis and Dal in their plate. I am witnessed of this, when I was in Kakinada in 1998, there was Rajasthani Hotel nearby Railway station (Samalkota) which was almost 15 KM far from my resident but on daily routine for me reaching there like going temple, because of my food habit.
Based on various information and their collective analysis, I made the following analytics:
| Recent Kirana data: | |
Organize Kirana Market: 10.60% appx 11% including 1% of the online marketplace. | |
Traditional Kirana Market: 89-90% | |
Market Size in USD billion: USD 400-500 Billion from Main Stable and FMCG from Kirana. | |
Per Month | 194,444 |
| Per day | 7,778 |
This average is high because out of USD 400 billion business approx 60% business comes from Tier one, two and Tier three cities where the average turnover of a shop is excellent.
| Nos of Stores | Per day Sales/ Store | ||
| 30% shops are in Tier 1, 2 and 3 cities | 3,600,000 | 18,148 | |
| 70% in Rural and Villages | 8,400,000 | 3,333 | |
| Total Appx. Stores | 12,000,000 | 7778 | |
( Fig given above is worked out by Balwant Singh Rana based on various market data available in open source)
20% of Stores in each City contributes 60% of Business has more than 20000 per day Sales, Appx 6 Lakh per month. These stores have a reasonable size where they can merchandise the right basket of products, and they can provide space to brands for more visibility.
More than 8 million shops having below 5000 per day sales which shows that still a significant portion of the consumer base is untouched by companies and this is due to low buying capacity and weak supply chain management systems. Above data is just a rough idea, since there is no authentic data survey or agencies, so it is sometimes not reliable but based on tentative market survey conducted by various companies and sales agencies we can predict above one in this way.
Flipkart one of the sizeable eB2C platform competing with Amazon in India has some ongoing strategies, I am sure that it will be acquired either by Amazon or Walmart. For Walmart, I am talking based on their few instincts where they want to come closure to consumers. In India, due to FDI norms, they will have limitation directing communication with end consumers so definitely they need the proxy to work in this field. Maybe this prediction goes wrong, but it will be happening in another world.
Metro cash & Carry, Future Group and many more are exploring Kirana for seeking last-mile offline market place. Since 1998 companies are trying to break the traditional Kirana ecosystem by various means but failed to do so, and now they are making them part of their supply chain system and trying to empower. Still, all are just seeing a platform for their products. Six months back Future group started their B2B segment via traditional distribution systems, however, so far they are not able to attend what they were expecting. Still, surely it will help retailers to benefit from the competition. Organize players and companies from abroad do not provide clear credit to retailers so there they have limitation but instead they are going to sack had with traditional distributors.
Traditional distributors are doing Business in their own way and providing clear credit to retailers, and they are giving Cash or controlled credit payments to retail companies. So this way, they are not doing different things, they are part of the traditional distribution system and promoting their products in the open market. All big giants in retail are trying to distribute their private label products in the free market and to the consumer in large through this system.
Opening a hypermarket in India is something has significant cost where they don't think that they will gain from such direct operations and selling private label products from their own stores has limited consumer base, they have to spread those products in the open market and then only they can see ROI from their India operation.
Last-mile connectivity in India is essential for all such players which they can not create from their own, and it is now evident that if they need to get sustainability in India, they have to associate traditional Kirana stores with them.
A simple calculation is there, India has 12 million Kirana Shops, selling main stables and FMCG to Indian consumers. If we go by average basket size for 12 million Kirana Shops, then it would be around Rs. 1100 per Famly per month which was Rs. 850 in 2008.
As per various market survey growth of organized retail is expected to grow 20% by 2030, which means 120 billion USD annual business is going to convert from traditional Kirana to modern organize retails. This way industry of 600 Billion USD is going to lose their share by 20% by 2030, resulting in a big set back to traditional Kirana shops. Traditional Kirana is going to disturb in some way or other way, but I am confident that there would be some great experients are going to happen which will help grow traditional retailers. Why I am talking about this, because of hyperlocal need in coming days. Day by day, consumers is facilitated through various ways, i.e. Omnichannel presence will help them to buy from any means.
Big Organise players like Walmart, More, Future Group, Reliance and even online players like Flipkart, Amazon and Alibaba (Paytm) see opportunity at Moms and Pops shop as their last-mile connectivity. This vertical will help them to stay directly connected with consumers for prompt delivery; also, they will save high logistics costs.
Further, I can predict based on my discussion with various IT experts, I am sure that soon startups may come in Supply Chain aggregation, it will be like e-Mandi where the seller will be the merchandiser and eB2B platform will act as a marketplace. One can imagine the Business GMV, it would be USD 2 billion or 3 billion dollars annually, and for India like market there we need more than one thousand startups to work like this and in such volumes. Still, there would be an opportunity for newcomers.
Recently new vocabularies are used in Retail Kirana :
like: Offline Market Place,
Online Market Place,
Omni Channel,
Empowering
Rvsm
Space
Cloud technology
Basket Size
Market size
Last-mile connectivity
Hyper-Local
So developments are there but still there are many challenges for Traditional Kiranas. Nevertheless, they are not ready for change and want to run their stores in the old manner. Problems from organizing retail are in front of them, but they just pretend to close their eyes and unknowingly misleading the facts.
Now the time has come to change the mindset and adopt the changes and webs are coming here in the industry.
Please write to me on parjakalyanm@gmail.com for information. You may share with me your thoughts, and with a join brainstorming, we can come to a conclusion. Remember, this is retail where we need to work hard and in Detail, after all, " Retail is Detail."
Writer: Balwant Singh Rana
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