Preface
The retail ecosystem is witnessing development happening in the retail sector worldwide. Indian retail size is huge which was around
$425 billion till 2010 and now as of 2022 estimated to be $800bn. CAGR 6.5% over 10 years period. The next 5-10 year projections are also again going with 10% yearly growth. Market sources are predicting $1.3 Trillion by 2026 and so on. Especially last five years made it a direct uprise which was due to dramatic change in consumer behavior, startup enthusiasm, use of technology, and yes a big thanks to investors for their burning money for making noise, making unicorns, and helping startups to make their ideas live on the ground and thought about bringing disruption.
As a retail professional this is what I was admiring during my first interaction with
Sachin Bansal of Flipkart in the year 2012 and I came to know how big is Indian Retail, specially Grocery
(Kirana) retail in India. This was the first experience that made my way into retail and soon became a learner professional. I had started visiting Kirana Shops and tried to envisage the ecosystem that was working to make them active and so on demand.
I was looking after backward integration of the supply chain, mainly developing the products and making live the thoughts that how I will transform the staple from its trading in "Loose" to packed in attractive packaging, i.e. hygienically packed products can be made available to high-end consumers. 80% of the merchandise in main staples were traded in loose/bulk size. Traders were selling in bulk packing of 25kg & 50kg to retailers and retailers were selling to consumers in loose using paper bags or cloth bags. In the beginning, there was less interaction of mine with the front-end sales, but soon I realized that without going into the market I will not get innovative ideas, and also will not help me to know the developments that were going on in the market. We have to learn what are the market sentiments going on, who are the new players entering the grocery, how big the competitor landscape is, and many more. So, I started visiting people, places, and product manufacturing units. That has given me a very open-minded view of the market, and also help me to learn a lot about the ecosystem of Kirana that was working and came to know who are the stakeholders.
I completed my graduation in 1998 and after that joined a Delhi-based export house as an account clerk. They were into the manufacturing and export of menthol and were one of the largest importers of pulses. Later, I was given the task of selling pulses in 1 kg pouches as an area salesman. I was given the sales beat of South Delhi. Me and my colleague Sweta used to visit the assigned sales beat shops regularly. I came to know about Kirana retailers first time and could know their importance in the retail ecosystem. They are the brand ambassador who is providing retail space for thousands of products and promoting them to their nearby vicinity, their close heart customers. They helped FMCG companies establish their products as brands. Earlier we rarely used the brand because at that time people used to say that we need a such and such product of this and that "Marka". Marka, though an English word, was used in the ecosystem as Hinglish.
From here the role of Retailers starts. Let's see how they play their role and what kind of sacrifices they are giving every day.
Can you imagine the share of Kirana retail in India, Let's say upto 2010?
Market Share of General Trade, Modern Trade & E-comm:
Segmentation started happening in the market after 2006 when Future group and many other hypermarkets started their operations. They created better visibility and helped enrich the consumer experience. FMCG companies started working on the segmentation of trade terms and customizing taking into consideration General Trade, Modern Trade, and E-com Trade.
Contribution of General Trade:
As per the current status, more than 12-14 million retailers are contributing 85% of total Retail, still, they are unorganized. As of date consumption size is more in Urban areas but now unbelievable growth is seen in the rural market. GT market will expand in rural areas with more speed. FMCG companies are working on various supply chain options. Retailers too have various options in terms of managing their sourcing. More focus is required here to make them organized and take them to the mainstream. The general retailer is now changing by way of giving new looks and feel to their shop. and trying to tune with the new development but the speed is slow.
Contribution of Modern Trade:
General Retail was 99% in the hands of stand-alone Kiranawalas but as per the market news, it was 95% till 2010. I still don't know who was among the 5% at that time who were organizing the retail.
If, I talk about Subiksha (Stared in 1997 and journey up to 2009 with 1600 stores), 6Ten (REI agro initiative started in 2007 journey upto 2014, 750 stores), Big Bazaar (Future Group started in 2002, said to have more than 1388 stores in all formats closed town operations in 2021) , Reliance Fresh (having 13450+ stores), More (an Aditya Birla initiative, started operations in the year 2007, having 575 stores), Vishal Mega mart ( Open the first store in 2007 having 400+ Stores Pan India ) Spencers (Started in 2001 an initiative of RP Goenka, having 135 Stores, Walmart, and Metro C&C they were having a small presence in terms of revenue, coverage, and penetration till 2010. In a few districts like Jodhpur and Jaipur National handlooms has a good presence and give tough competition to nearby kiranawalas and other retail formats.
Here mentioning Walmart and Metro C&C names because they are deemed to be B2C stores, and mostly end consumer buy from them but their data is misleading in terms of B2B representation. Why I mentioned the names of these Giants because they have started selling groceries from their stores but more or less they are affecting the Kirana Stores by way of selling to deemed consumers. So, we can't say that they are not disturbing the existing Kirana business. But till 2010 there were not such big contributors who can drive the organized market, especially in the Grocery segment, that's why I kept it 95% till that period. A swing start happening in the market right from 2012 and onward.
D-mart started the first store in Powail, Maharastra in 2002, As off date i.e. 2022 Dmart has the strength of 294 stores in 11+ Cities , and penetrating like crazy, going to be one of the leading retail chains in India. Dmart is one of the big retailers that are affecting the business of Kirana retailers and other general stores.
Also, corporates are foraying into modern trade like Sanjay Gohrawat's Localmart in Gujarat. Every city has a few stand-alone supermarkets who are contributing upto 10% of that particular retail market
As per recent news, one Mumbai-based business conglomerate Darwin is also planning to open its Retail Chain in the name of DP Retail. In the southern part, we have Ratnadeep having 100+ stores.
These modern trade formats contribute 10-15% to the total retail segment. But, if we talk about only grocery then it should be around 5% ( we take an example of the total retail market. it is estimated to have around $800 billion, so with the 15% share of total retail we have $100- $120 billion led by these offline stores i.e. modern trade formats) which is something like a bite from the big pie of which 85% still is with unorganized retailers.
a market survey by https://www.statista.com
Market start teaching new terminology to the FMCG companies and soon they realized that Modern trades in the form of Chain stores are the future of Grocery retail in India, so they start developing different product assortment, pricing, and promotions strategies for modern trade and so on.
Contribution of E-Commerce Trade
B2C E-Commerce -Consumer-centric ( with new catchy names like Social Commerce, Hyperlocal, Omnichannel etc) having $ 84 billion contribution in total retail.
Same time e-commerce taking consumers in their center is spreading like crazy. Amazon and Flipkart are the marketplaces where brands start selling products across categories, even groceries are the target segment. on the other side, B2C grocery platforms like Jio mart, Grofers, Dealshare, Citymall, and Milkbasket are among the startups having a consumer-centric approach. We call them direct to consumers. D2C etc.
Don't get confused by their name as convenience stores, priority,. Hyperfocal, omnichannel commerce, social commerce, and Q-commerce, the purpose is named, how to sell products directly to consumers.
Quick - commerce new terminology of E-commerce
Developments are there in the grocery market in a big way. Now it is time for Q-commerce like Zepto, Blinkit (earlier Frofers), Swiggy's Instamart, and many more to have an area-specific presence. but Zepto, Blinkit, and Instamart are the national players having a presence in major cities. They are providing quick delivery services, i.e. on click. Consumers get the stuff in 10-15 minutes.
Just have a look on the data side, still, e-commerce has not reached up to $100bn size.
In the name of disruptions, we can see these developments.
I am not criticizing their start and existence. It is good that retail is developing and growing day by day. But, one thing that we have to consider is how much magnitude of the thrill is required to disrupt the existing ecosystem. We have to accept that :
India does not need retail, retail is here from centuries but the only thing is how can we modernize it by empowering their existing setup, way of doing business and connecting them with the consumers..
No doubt, In today’s times when the preferences of the customer are changing, there’s a need for change in the working and operations of these unorganized or traditional store owners. Kiranas or traditional store owners play an important role in the Indian consumption ecosystem. These store owners have been friends with their customers, keeping an eye on their needs as well as adapting merchandise buying in line with the seasonal and festive needs of their customers. Even today if we go to our nearby Kirana store, he’d know the pulses we buy and the brands we use.
Here we have the above statement for our Kiranawalas but on the contrary, we are trying our best to disturb them by way of modern trade & e-commerce, social commerce & Q-commerce. Hope in the near future there will be some other commerce may be Virtual Commerce based on meta. I call them enemies of Kiranawalas. They are the culprit who wants to swallow them alive and without any pain in the mind.
Still, 85% of retail is driven by the small Retailers, we call them Mom & Pop stores, Kiranawala, etc. etc., and their contribution even to GDP is outstanding. contributing up to 10-11% in GDP and also generating up to 8% employment in the country.
As per the market data soon retail will have $ 1.2 trillion size. There will be opportunities for all stakeholders but the least will be for Kiranawala i.e. Kirana Retailers. As per my survey, I did from the Jaipur market. One D-mart store contributes 30-40% to the downsizing business of nearby Kirana Stores. So whenever news comes in the market that D-mart is opening stores in the such and such locality then you can see the pain in the eyes of retailers and a kind of unrest about losing business. They are afraid of D-mart because it will kill them in business terms. One major player Jio-mart is on the same verge but so far he is wearing the tiger leather and seems friendly with Kiranawala trying to establish himself as a B2B player but the truth is different.
The same is with Q-commerce players who are giving 10-15 minutes deliveries to the end consumers, they are taking the big pie from Kiranawala business. Because end consumers come down to Kirana stores only for their just-in-time requirements i.e. impulsive buying which are now replaced by the Q-commerce players.
This is the fact that these developments in e-commerce or by big offline retail chains are killing Kirana retailers and the magnitude of such activities is increasing day by day. I carried out a soft survey on a few A and B class outlets in Jaipur. I know most of the retailers for a long and doing business with them. Earlier they were generating monthly 10-15 lakh business. Now situated is different, competition from the B2C and big box retailers more stronger than ever, and Retailers has to lose heavily and they are now generating 5-7 Lakh per month. Customer footfall is decreasing day by day. Almost 50% reduction in business has been recorded in last two year. A huge change in the name of disruption is going on.
Courage of retailers
I will congratulate to all store owners that they stood strong against the tough competition.
If they still survive it is because of their personalized relationship with the consumers otherwise they will have to shut down their stores long back. These are the market forces where one individual can't do anything or can't oppose the changes. Changes are unavoidable and everyone has to be part of it..
Remedies to safeguard Retailers
Few questions need to be answered by themselves.
- How they can be brought under one Name?
- Is centralized supply system will work for them so they will get competitive products.
- How about the product activation platform so they can be organized?
- What will be their role if they are treated as a hyperlocal partner for products under D2C brands?
- Is digitizing will help them
- What about if we use their store as a product promotion platform?
So far Indian Retailers are getting confused day by day as lots of trumpets are buzzing in the market by the startups but they have some sort of good things which are helping them to stay in the market.
Existence of Kiranawala or retailers
It means Kiranawalas will remain there forever like they are in the US, UK, and UAE markets. UAE retail market is still dominated by retailers or nearby groceries. It would be earmarked by saying that by 2030 the contribution of modern trade & e-Comm will reach 40%. Due to the increase in consumption market size will also increase exponentially and touch above
$1.8 Trillion. It means 60% market still will be in the hands of Kiranawala so panic of that magnitude is not but yes retailers have to adapt to the changes. They have to find the answer themself and with an open mind should establish the best practices. They should take benefit from the competition.
Balwant Singh Rana
15.8.2022
Writer is a cofounder of startup working for the empowerment of Kirana retail. Critics will always speak if truth shut the mouth.
No comments:
Post a Comment