Today we will
talk about problems and challenges in Indian Kirana (Grocery)
Retail.
The Indian Retail
sector is one of the most unorganized markets in terms of structure. As was stated in various studies India Kirana is run by small-2 families,
still in its raw form. When we compare Indian retail with western, or other developed countries we
can see a big difference. Today Indian Kirana Market is contributing around
$450 billion, a big contributor to Indian GDP, nearly 10%, and contributing to employment to the tune of 6%. But,
still, 90% of Kirana retail is unorganized
Running a grocery store in this semi-modern India is no easy task. The economic
condition of the consumer is shifting from low to middle and middle to high,
accordingly, preferences are also changing resulting in changes in shopping
habits and convenience. Tier 1 to Tier 3 people in cities with higher
disposable income are finding a way to experience shopping through the category
of retail. For people of such income groups, Modern Retail is the shopper’s stop.
Amidst the
proliferation of organized retail, something went awry in and around these mom-and-pop shops, and their numbers are dwindling day by day. The aggressive
players in offline retail are Reliance Fresh, Big Bazaar, DMart, More, and
Vishal, some having 4 to 5 stores in a city through over 100,000 sq ft of
space. If I change the location and put the size of the mom-and-pop store then
about 1000 stores are equivalent space they are using in a city running 4 or 5
hypermarkets.
Now that
offline organized retail is making a noise, e-commerce is also booming. Both
Walmart and Amazon's giant e-commerce platforms have now deepened their eyes and
started mining biological data to increase the ticket size from Rs 2550 to Rs.
5000/. Despite claiming to have lakhs of retailers joining them, they are not
making money. If we talk about Walmart, 40% of the business is coming from
retailers but not in investment ratio i.e. millions of dollars are needed to
set up Cash & Carry. The average basket size should be above Rs. 5000/- per
month when one is catering to the entire market or 70-80%.
According to hypermarket owners "based out in Delhi" - no one can
wipe out mom and pop shops from India even in the next 50 years. "We have
to build our own consumer base and leave them to their consumer base. We're on
it. Why is a section not paying attention? Burning money is not the solution.
Indian consumers are unpredictable so don't think about loyalty on their part. When
Metro C&C, Carrefour, and Walmart were entering India, they used to say
that they are a big threat to retailers despite they were allowed to do
business in B2B only i.e. Retailers. This is my honest prediction that after
5-7 years in the near future they will have to pack up their own system from India
and they will be forced to sell their setups. No one can think to wipe out Kirana stores
from India.
Based on my one-year-long in-depth survey across 7 major cities of India and hours spent on the
streets inquiring about the Kirana retailer's business pattern, future aspects, and their interest, I can predict that the coming year will be a good
year for grocery stores. It will be more dedicated to grocery retail and the
entire ecosystem. There will be a focal point i.e. grocery retailer. All is
going to please them to find the precious space for their products. Even many
will try to provide various IT solutions to them like POS, auto-replenishment
systems, etc, and accounting systems and VAT management. Also, various
banking services from micro banking will come to assist their working capital
need.
I can predict
based on my deep conversations with thousands of people in 2011 and 2012 that
as the consumer is adapting to the changes, they are happy to buy a new
package, clean and quality product. In food products, they are less brand
savvy. This will revolutionize the growth of private-label brands in India.
This means that there will be an influx of regional and local brands in
a way but the only challenge for them will remain the "retail space"
i.e. retailer, and connector.
So what's the harm if I'm talking more of a grocery retailer? After all, they
are the main connector and channel partner
to the brand connecting to the end consumers, without pleasing them how can one
think of their brand entering the retail space and how will they go about
reaching the end consumers? nobody.
I can see the
pain point of retailers and I would ask new entrepreneurs to talk to them about
the challenges they face and what solutions they can provide as a business to
protect their business.
Usually, the
average size of a Kirana store in India is less than 150 square feet but here
we will talk about medium-sized stores which are doing business of Rs. 5 to 10
lakhs per month. In this segment, you can find 20% of the shops in the city
having 300 sq ft of shop space. Let us take this figure here for the purpose of
our study.
I am taking the example of the Capital city of India, Delhi.
Here in Delhi, there are more than 25000 stores running in the different surrounding
areas whose size is 200-300 sq ft and if we talk about all the Kirana stores
below 100 sq ft then these figures are beyond uncountable, approx. 110000
stores are within 50 km. radius in Delhi
These 25000
stores are major grocery stores contributing nearly 60-70% of the total market
size.
I have visited
more than 1000 retailers and personally met them and also interviewed them
about their business prospects, challenges, problems, and also their personal
life, social life, etc. The results were out of the box and it is surprising how
these people are managing their regular lives, dealing with more than 150 to
300 products having 1000 to 2000 SKUs and fitting them in their small-sized
shop, having regular discussions with distributors/ vendors/salesmen etc. and
the difficulty of hours really makes us think and so we can know the basics of
their business.
Before we go ahead Let's figure out their shop :
Now we will
talk about the problems and challenges that a Kirana store owner is facing: Based
on the personal interview of retailers, I found that they are facing numerous problems
and running their small shops almost seating on the future challenges.
- Space
constraint - Improper
Product Assortment - Hygiene
issue - Lack of cleanliness - Poor Time
Management in Buying and Sourcing. - Decreasing
Footfall - Mishandling
of Product expiry resulting losses. - Communication
Gap Company to Retailer. - Competition
from large format Retail stores and walk-through stores. - Change in
Consumer Behavior - Manpower
Issue. - Promotions
and Offers not available - High
Density of Kirana Stores in one vicinity. - Next
Generation is moving out of this business. - Lack of
IT, not using computer billing & POS. - Limited
Working Capital. - Food
Safety compliance. - Do not
want to keep records of bookkeeping and due to - Lack of
market knowledge. - Due to their stand-alone status and no apex body representing them to safeguard their
business. - No Banking
facility in terms of Credit line as a retailer does not maintain books of
accounts.
The problem
mentioned above now leads them to this picture:
They
are facing more than 20 types of issues, so do you think they will have a
solution for these problems or is there someone who says:
Last
week I spoke with a senior executive at Walmart, they are in the process of
developing a retail-oriented model in which they will provide their various
products from their centralized centers, as well as create a credit line with
banks or financial institutions. are planning to do., In terms of volume
purchase discounts, QPS, and other offers they have started giving to the
retailers. The sales team is going to the market and takes orders from the
retailers. But even then, a major problem is the credit facility that retailers
currently get from traditional distributors.
I
have gone through various analyzes and since 2009 I am working on this project
but there I have not found any solution to save their life. I mean when big
retail players are opening their stores in almost every corner of the market,
most of the retailers who have money and vision are converting their stores
into modern outfits.
I
have a plan that how they will be saved from such stiff competition and what
kind of solutions will work for them. My concept “Pragati” is almost in the business model
stage and looking for investors who can give their 15-minute time to go through
my business Plan. It will be more suitable for companies like Flipkart or
companies who want to start retail offline to online. A franchise model will give a uniform
name to unorganized retailers, by giving this uniform name they will be open to the market. They will have the power to drive
consumers to their Stores. Brands will
be waiting for their turn to exhibit their products or get dynamic
shelf space, more consumers can place orders from their nearby store and they
will be delivered within 15 minutes. It will be Quick. There will be numerous revenue streams if
anyone can go through my model.
Their
concern comes from the outer side but they are unaware of the inner flaws.
Journey
continued..................
04.10.2012 (published)
