Quick-commerce (Q-commerce) is undeniably transforming the retail landscape, particularly in the grocery sector. With faster delivery times, increased convenience, and competitive pricing, it has swiftly captured a significant share of the market. However, while this shift benefits consumers and the growing e-commerce industry, it's having detrimental effects on small Kirana retailers across India.
Kirana stores, which make up 90% of the total grocery retail market in India with an estimated 12.6 million outlets, are facing immense pressure. Most of these small, family-run businesses operate on thin margins. Around 70% of Kirana retailers generate less than ₹2.5 lakh in monthly sales, earning a gross profit of about ₹30,000. After expenses, their take-home profit often falls below ₹15,000 per month. Given this financial strain, upgrading their stores, adopting new technology, or competing with the convenience and speed of Q-commerce seems nearly impossible.
Q-Commerce Growth: A Threat to Kirana Stores
According to a RedSeer report, the Q-commerce market in India is projected to reach $5.5 billion by 2025, a substantial increase from its current size. In 2023 alone, the gross merchandise value (GMV) of quick-commerce reached $2.3 billion, showing a growth rate of over 70% from the previous year. The contribution of Q-commerce to the online grocery market is expected to jump from 10% to 45% in the coming years. FMCG companies are already witnessing double-digit growth through these platforms.
As these platforms gain momentum, the shift in consumer behavior is becoming evident. Urban consumers, especially millennials and Gen Z, are increasingly turning to apps that promise delivery within minutes, ditching the traditional Kirana store. This is where the real challenge lies for small retailers.
Challenges for Kirana Retailers
The Retailers Association of India (RAI) has emphasized that instead of complaining about the rise of Q-commerce and e-commerce platforms, small retailers should focus on upgrading themselves. While this advice may seem reasonable on the surface, the reality is far more complex for Kirana store owners.
1. Lack of Capital: Most small retailers simply do not have the financial bandwidth to invest in technology, inventory management systems, or delivery infrastructure that could help them compete with the Q-commerce giants. Upgrading stores requires significant capital investment, which most Kirana retailers cannot afford.
2. Limited Access to Technology: Even if some Kirana owners are willing to embrace technology, they may lack the digital literacy to use the tools effectively. Many are not well-versed in inventory management software, e-payment solutions, or customer relationship management systems.
3. High Operational Costs: Q-commerce platforms benefit from economies of scale and significant backing from investors, allowing them to offer heavy discounts, absorb delivery costs, and optimize supply chains. Kirana stores, however, operate with high operational costs relative to their income. For them, matching the pricing and delivery speeds of Q-commerce platforms is financially unviable.
4. Consumer Shift: As consumers gravitate toward convenience, Kirana stores are being left behind. Younger, tech-savvy consumers now prefer the ease of ordering groceries through an app rather than visiting a local store. This shift is exacerbating the plight of Kirana stores, as they struggle to retain their customer base.
4.Threar for Local and region Brands:
The rise of Q-commerce is a growing threat not only to Kirana retailers but also to local and regional brands that rely on them for distribution. Traditionally, these brands have secured space in Kirana stores through personal relationships and local marketing efforts, allowing them to compete with larger FMCG companies. However, as Q-commerce platforms, driven by speed and convenience, gain market share, these smaller brands are struggling to find space.
Q-commerce platforms prioritize well-known brands, and their limited inventory selection leaves little room for new or regional players. Furthermore, the high listing costs and monopolistic practices make it even harder for local brands to get featured. With 70% of Kirana retailers earning less than ₹2.5 lakh monthly, many may not survive, leading to a reduction in the availability of regional products.
As Kirana stores face increasing pressure, local brands risk losing their primary sales channels. This will result in a homogenization of the market, with fewer choices for consumers. The lack of government and industry intervention to support Kirana retailers and regional brands could leave the grocery market dominated by large corporations, reducing competition and undermining the unique, diverse consumer experience.
Government and Industry Response: Lacking Clarity
The Indian government has not yet formulated a comprehensive plan to assist these small retailers in adapting to the changing landscape. While there are initiatives such as 'ONDC' (Open Network for Digital Commerce) to integrate small retailers into the digital economy, their reach is limited, and awareness among small shop owners is low.
Investors, startup founders, and stakeholders in the Q-commerce and e-commerce sectors seem largely unconcerned with the fate of these small businesses. The focus remains on growth, innovation, and consumer satisfaction, with little attention paid to the livelihoods of the millions of people dependent on Kirana stores for their survival.
The Future for Kirana Retailers: Bleak Without Intervention
Without substantial support, it is difficult to envision how small Kirana stores will survive in the long term. While some may manage to upgrade and integrate with digital platforms, the vast majority will likely be unable to keep pace with the rapid changes in the industry. The social and economic impact of this could be devastating, especially in rural and semi-urban areas where Kirana stores serve as a primary source of income and provide essential services to the community.
The rise of Q-commerce represents a significant shift in how consumers shop for groceries, but it also threatens the existence of millions of small retailers. Unless meaningful intervention is made by the government and industry stakeholders, the survival of Kirana stores hangs in the balance.
In conclusion, the rapid growth of Q-commerce presents an existential threat to India's traditional Kirana retailers and the local and regional brands that rely on them. While Q-commerce has transformed the grocery shopping experience with convenience and speed, it has placed immense pressure on small retailers, many of whom lack the capital and technological capabilities to compete. As consumers shift towards app-based shopping, Kirana stores struggle to maintain their customer base and profitability.
Moreover, the rise of Q-commerce has also marginalized smaller, regional brands that depend on Kirana stores for shelf space and visibility. These platforms prioritize larger, well-known brands, leaving little room for local products, which could lead to market homogenization and a loss of consumer choice.
The Indian government and industry stakeholders have yet to devise a comprehensive strategy to help these small businesses adapt. Without intervention, the future of both Kirana retailers and local brands looks bleak. Protecting the diversity and accessibility of the grocery retail market will require significant efforts from both policymakers and industry leaders to ensure that small retailers and regional brands are not left behind in this rapidly changing landscape.
Written by Balwant Singh Rana
Parjakalyanm@gmail.com
