Why to go with traditional Distribution System in Grocery retail.

India is heading toward a $5 Trillion dollar economy. I am confident that under the leadership of  Hon'ble Prime Minister Mr Narendra Modi  India is going to shine in all respect. Industry plays a big role defining in development which is visible everywhere in the country.  Every sector is growing exponentially but the rate of growth is slow but steady.  It was the bad time during covid19 that slowed down industrial growth but now the pace up is there.  Here I will talk about the development & growth going on in the Retail sector.  Let's have a glimpse of the story. 

The Indian India Brand Equity Foundation (IBEF) is a Trust established by the Department of Commerce, Ministry of Commerce and Industry, Government of India. "Indian retail industry is one of the fastest growing in the world. As per Kearney Research, India’s retail industry is projected to grow at a slower pace of 9% over 2019-2030, from US$ 779 billion in 2019 to US$ 1,407 billion by 2026 and more than US$ 1.8 trillion by 2030. India ranked 63 in the World Bank’s Doing Business 2020 publication. India ranked 73 in the United Nations Conference on Trade and Development's Business-to-Consumer (B2C) E-commerce Index 2019. India’s direct selling industry would be valued at US$ 2.14 billion by the end of 2021. Consumer spending in India increased to US$ 245.16 billion in the third quarter of 2020 from US$ 192.94 billion in the second quarter of 2020".

Since 2016 retail sector is disruptive by promising startups,  more than 100 startups turns Unicorn which is $ 100 bn in the business sphere so far opened. 60% share of the Food & Grocery segment is in the overall retail out of which 90% is still unorganised.  The total retail market is going towards $1.497 Trillion from Its present $800bn market size.  This shows the speed of consumption by the large public of India. 

Retail 4.0 still is in its nascent stage, post covid we can see dramatic changes in consumers' buying habits.  Consumer preferences are changing due to many reasons of which credit goes to organised retail which somehow made a funnel for new brands, brand awareness, and presence up to tier fourth towns.  

Corporates are there in the market who are serious to open their stores in remote cities too but the still big question is how they will meet the operating cost.  The cost of reaching directly to Retail or consumer is huge.  There are many ground-level challenges that we have to understand.  

eB2B startups like Udaan, Jumbotail, Shopkirana, Maxwholesale, Apnaklub, Elasticrun, and many more are reaching directly to Retailers. However, there is nothing wrong or right but the approach should be taken into account after evaluating the fundamental and ground realities of the business. 

Are there any new ideas on which Indian startup is working? I don't think so. They are copied either from Western countries, China or other developing countries. I don't want to criticize that they are not workable in India but before that, we have to evaluable minutely and should take into account the ground realities, percentage of margins, execution hurdles, mindsets, and most important the dynamics of Indian economics. A model of Direct Retailer is successful in Europe and UAE because of the centralization of the Supply Chain & uniformity in distribution channels.  FMCG distributors are selling more than a thousand brands from one centralized system so reaching retailers and making them dependent is easy as supply of such brands is only connected with the said distributors

Al Gurg is Uniliver's sole distributor in UAE so it is a kind of monopoly of the group where Retailers have to depend on them.  Same way here in India HUL has city-wise distributors who directly bill Retailers. P&G is working on state-level distribution and accordingly appoint distributor who takes the supply chain for the entire state like DB Distributors in Rajasthan state and some part of Gujarat State. 

I've been witnessing the growth in eB2B retail since 2014, a kind of disruption being created by eB2B startups since then. They work directly with retailers through their technology intervention (DTR = Direct Retailer). There is no doubt that they have been able to create a stir in the ecosystem and have created a void in the traditional supply chain where retailers are at the centre of all such disruptive ideas. But, why does the retail ecosystem need these horizontal distribution channels? Do they not have confidence in their traditional distribution system or do they want to increase the capacity of these channels? But if it's a matter of increasing the capacity in the funnel then why? Because on the contrary, FMCG companies are creating competition for their old distribution channels.

FMCG companies came to know about such blunders when existing distributors started agitating that their stake is been liquidated by eB2B startups who are selling similar products at a discount, however, those offered by eB2B  provide an advantage to retailers through service level excellence. These players are again putting pressure on these traditional channels. There are always good and bad and there are inherent characteristics of any system but some fundamentals always work when we do business. 

FMCG companies have to evaluate whether traditional distributors are a key component of the entire supply chain, and are the entities that helped them brand their products. I met many high officials of national-level FMCG companies and asked the same question why are they killing their old distributors? Do you have any feelings for them? Or put a blanket over them entirely without evaluating the ill effects on business volume and the stability of their traditional distribution system. 

Later, they realize that they will face huge agitation from the existing channel if they continue to push on the same product line with eB2B players, so they come up with a product-level strategy that differentiates at the SKU level will be done. It is all about product level and ToT level strategy which they are working on since 2012 in the market.  Product SKUs and grammars differ in many respects for modern trade (MT) and are of different sizes for general trade (GT).  Also, this has abused the system by and large by the MT players. Later on, with the emergence of E-commerce, things went in other directions and price discrimination start happening across formats. Flipkart & Amazon started their own pricing,  Modern trade was on its edge with the GT.  Such a Battle is going on in Indian grocery retail since 2015 and now the intensity is increasing.  It is hard to control the price cut basis markdown.   In this kind of battle, FMCG companies are the winner. Despite channel conflicts, they are able to sell their products and grow YoY. Now they are playing a diplomatic role, and don't want to oppose either channel but to deal in a diplomatic way. Is it a good strategy?

But, who are the most affected? Is it an eB2B player, offline supermarket/hypermarket, or e-commerce marketplace under MT channel? The most affected stakeholders are the traditional distributors who are losing their business day by day. Traditional distributors are only associated with retailers, they do not have any other channel where they can sell their products.

On the other hand, eB2B startups are not able to sustain themselves due to low product margins and high operating costs. So burning money is the only way for them to stay in the fight. For e-commerce marketplaces,s they are least bothered as sellers will think about the outcome, however, stability is also a question for e-commerce marketplaces but they will be in the market.

My big question is who is going to survive in the retail ecosystem despite such low margins. Will heavy burning by the startups will help them to create their customer base in the long run?  A value chain of 18% compared to 35% in Western countries is not enough to carry the burden of all such disruptive ideas.

As far as I have a little knowledge and experience of 22 years in this ecosystem, I must say that the cost of disturbing the existing ecosystem is huge but empowering them is economical, scalable and profitable.

At the same time, there is a big question for venture capital firms. On what basis are they investing in this segment especially in grocery eB2B players? The "skill set" in my previous post will only help grow the business temporarily, but will not help make it sustainable and profitable. "Importantly in the business mindset is a vital tool to make a business sustainable and profitable".

Let's brainstorm on this topic and share your valuable feedback.  

Regards/ Balwant singh Rana

Startup Enthusiastic

my read shelf:

Business Mindset taken over by the Skill Set

****

I have seen many start-ups growing from their
initial stage to the stage of recognitions and status, however these stories
were not written in the study room but executed on the ground, thus witnessing
many ups and downs by many startup founders. Despite all this, we can say that
those who got good traction they became unicorns like gems of luck.

The Indian startup ecosystem produced 100+
unicorns across different segments which shows strong traction in terms of
getting funding, making the enterprise scalable and creating valuations.  All is happening because there is a bond
between founders and investors which shows trust that both will be benefited if
the venture scales the business.

More than 85 unicorn built a large sphere in the following sector and
many more are in the line to touch the unicorn status by end of September,
2022.

Sector wise: Broad Level 

1.       Enterprises Tech

2.      
Health
Tech

3.      
Educational
Tech

4.      
Financial Tech including Equity market

5.      
Retail Tech more onto b2b side

6.      
Consumer
Tech – E-commerce

7.      
HR
Tech

8.      
Tour
& Travel

9.      
Real
Estate Tech

10.  
Media
& Entertainment

11.  
Advertisement
& Marketing

12.  
SCM
& Logistics (Transport Tech)

13.  
Other
sectors

14.  
Biotechnology

 Sector wise – Micro Level

 

Just
to refresh the current knowledge   there
are three sectors which has produced more Unicorn in India and those are in
Enterprises Tech, Financial Tech and Retail Tech including E-commerce, about
62% of total startup in India comes from the said sectors. 

 Let’s
figure out the sectors where they got a good status and further more they will
be profitable apart from scalable point of view.  They are purely basis on adoption where
startup has to burn money to bring the adoption in long run so that they will
have more top line and bottom line to make themselves sustainable.  I will put such startups in Business skill
category where each entrepreneur is committed to bring sustainability in the
company and accordingly working on it by taking ample risks.  Business skill always comes through
experience, and it teach us to handle the situations in wiser and it helps us
to understand it in more responsible way. 
Sometime we assume that business sense will come with the experience,
yes it is true but more likely it is inherently god gifted within us that
cannot be replaced easily by any management trainee or technocrat.  To some extent it is true but we can’t ignore
the modern way of management lessons which is being taught by the renowned
institutes and those are aligned with the modern techniques of technologies.

 You
can figure out that 99% of unicorn startups were built by the Technocrates or
masters of management from top management institutes. So, the fact of business
skill is taken over by the Skill set is true that Skill set is stronger. 

Facts
of Skill set is technology that is helping them to think beyond periphery.  80% startups are working on IT driven solutions
so they are from skill set i.e. technocrats. 
They are most trusted by the investors because they are master of management
where they have analysis and gut feeling that skill set will take over the
Business skill.

In
support of the above fact, let’s take example of Flipkart, BYJUS, PayTM,
Swiggy, Polygon, OYO Rooms, Dream11,
RazorPay, Ola Cabs, CRED, Postman, PharmEasy, PhonePe,
Zomato, Icertis, Ola Electric, Pine Labs,

Dailyhunt,
OfBusiness, Meesho, ShareChat, Lenskart.  

Above
mentioned startups have created great valuations and are in the club of over $5
billion valuation. If you take a look on their founders and co-founders, you
will understand why they built an empire in a few years. They were not from a
business background, so I would say that most of their business mindset was not
in line with the original and not naturally formed, but they built unicorns.

 And
more than 15 tech based startups are in line to become unicorns in the coming
months. The founders of these unicorns are either masters of management
administration or they are technocrats. The same is with investors. VC funds
are owned by the network management administrators of LPs, PE funds or angel
investors. Overall they are driving by the skill set in the industry they are
in. But one aspect is more relevant which I will mention in the following way,
and that is the business mindset. Business mindset is very much needed in
business where the movement of goods is directly managed by the founders of the
startup. Here more emphasis will be with the fundamental side and the market
conditions.

 Why Business mindset is important?

 Entrepreneurs
are more refined word when we talk about building an organisation by a person
because he uses skill set wisely with business mindset.  He is the man who find certain problem in the
business ecosystem and through great ideation they build an organisation.
Certain parameters of industries have to be complied while working on the
solution side.  Now a days we are giving
these organisation new name “ Startup”.

 Two
years ago the co-founder of a B2B marketplace came to my Jaipur office. When I
asked him about business thesis and fundamentals. He said with confidence that I
really do not know the business and about its mindset. We are technocrats so we
know our technology better that it will do business. I was astounded to hear
the answer that responded so quickly how could anyone say "I don't know
business". The said founder was from a large funded eB2B Seller platform. With
due respect I said, you are doing good in B2B retail. In this reference would
like to say about Ofbusiness, a startup. OFB is a tech-enabled platform
that facilitates
raw material procurement and credit for SMEs with focus in the manufacturing
and infrastructure sectors. Founders of OFB comes in the skillset group but the
way they gave directions to their business, I must say that they are using
business mindset somewhere to align the executions. When physical movement of
goods directly comes into business then one must go with business mindset approach.
That's how I'm trying to understand.

 Again,
I met some investors in LPS from Sequoia, Accel, Tiger Global and several VC
funds and I asked the same question. Is the business mindset worth them or are
they part of a cartel of skillset? I asked them why they are investing in such
and such sectors and what cartel they are part of?  They said, we don’t know the business what
startup is doing, we are only concern about the solution they are providing, is
it scalable a technology driven. They are concern with the returns and risk
they are expecting. I am highly inspired by Mr. Sanjeev Bikhchandani, founder
of Info Edge, a successful VC fund in the ecosystem because he is a successful
businessman who build naukri.com and many other ventures. He is full of
business mindset. Investor should learn from him that how to find a business
mindset founders and when to invest.

 I am
sure that founders of startup & LPs of investor fraternity will oppose my
thoughts on business mindset or skill mindset because most of them is using
skillset to drive their business.  As per
them they are building a business empire so they are business people, True,
those are running businesses are business people.   A layman will have this thought and
agreement.  But, I am taking about
business mindset that is something different which has many dimensions.  We cannot expect that a fresh graduate of age
20 or 30 will have those thoughts and mindset. 
Just check the following and then compare it with your skillset.

 Entrepreneurial
mindset is only important factor that will make or break a venture’s success

     ·    Understand the market trend & forecast

• Know himself and market as a domain expertise – Business side

           ·      Dare to face failure – Risk Appetite - Resilience 

• Believe in Networking   

 ·        
Positive
Thinker |   Goal
Oriented |    Creativity |    Accountability |   Decisiveness |  Passionate  |   Patience |   

 It
is imperative to say that business owner should have business mindset first and
skill set he /she can get through taking higher /professional education or can
have it through experience.  Few
characteristics are making difference in the above statements.  Business mindset has some inherent tools in
his/her mind that he/she use while making decisions. It should be like that.

Two #equation = purpose is same , what is best suited for entrepreneurs.

Startup with Business mindset + Skill set = Entrepreneurs =Enterprises = Profitability =Sustainable business (Medium Term, ration of Success is 85%)

Startup with Skill Set = Scalable = Negative EBITDA (if+ Business mindset join) = Entrepreneurs=Enterprises =Profitability =Sustainable business ( Long term, ration of success is 15%)
#business #startup #mindset #entrepreneurs #sustainable #success
#retail #retailers #businessanalysis #skillset #grocery #kirana 

 So never let skillset to hijack your
business mindset, rather develop it, learn it

Small & new Brands – Driver of 80% of Indian FMCG market

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If you have ever noticed, how many small scale
brand companies are involved in the FMCG sector in India? You will be surprised
to hear that there are around 30000 small-2 brands of Grocery and consumer
durables, footwear and clothing catering to the needs of 80% of the population
in India but we are in light of only 20% of the corporates who rule the FMCG
sectors. Some of them are HUL, Dabur, Marico, Colgate, P&G, Bajaj etc but
they are feeders for 20% of the demand. It gives us space for a future where we
might think there's still a big room to grow.

You will find that different brands have a
presence in a range periphery and it goes to different 2 areas. According to
market sources more than 10000 brands were launched during the COVID time in
2020-21 in different parts of the country. The momentum in the FMCG sector is
still aggressive.

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According to the survey by traders' body CAIT  above statement is validated in the  news article of Economics times.  Link given here : https://economictimes.indiatimes.com/industry/cons-products/fmcg/products-of-30000-small-brands-cater-to-80-pc-of-population-report/articleshow/90894928.cms

“Household
products of over 30,000 brands operating at small and medium scale cater to a
majority of the country's population, while only 20 per cent use such items
sold by big corporate houses, a survey said. Products of Fast Moving Consumers
Goods (FMCG), consumer durables and cosmetics from over 30,000 small and
medium brands are catering to the demand of 80 per cent of India's population,
according to the survey by traders' body CAIT. The survey was conducted on the basis of use of item
including food grains, oil, grocery, personal cosmetics, inner wear, ready-made
garments, beauty and bodycare, footwear, toys, educational games and healthcare.

"It's
a myth that about 3,000 big brands of corporate houses, particularly in the
FMCG sector, consumer durables and cosmetics Etc are catering to
the needs of the people of the country. In fact, more than 30,000 small and
medium but regional level brands are the largest contributor in meeting the
demand of the people of India," CAIT (Confederation of All India Traders)
said.

The
survey said the demand of a vast majority is fulfilled by the products of small
and tiny manufacturers sold in loose quantity.

Big
brands are in demand among people of higher and upper-middle class due to
extensive media and outdoor publicity and endorsements by celebrities, CAIT
secretary general Praveen Khandelwal said.



On the other hand, brands of small manufacturers
are sold through one-to-one contact between customers and shopkeepers, also
through word-of-mouth among people of medium, lower-medium income groups and
those belonging to economically weaker sections, he added.( Originally
published on Apr 17, 2022 )”

 

New candidates are entering this segment,
especially after the funding to varioius D2C Brands. Mamaearth and many other
brands received a good amount of funding. Now, we can say that VCs are
interested in investing money in companies where the future of private label
brands is more visible and they can see 20x growth in terms of ROI.

Many more will come up with many newer ideas.
Recently "One Dry Fruits Brand Happylo" has got good funding.
Platforms like Amazon and Flipkart are providing great opportunity to brand
makers to showcase their products to millions and even billions of consumers.
This is the power of the platform.

Developing a distribution channel is going to
be a challenging task for small and small brand owners as not everyone is able
to find a place on the eB2C platform, so that they can eventually find a place
in the kirana retailers. Again it is a huge task to provide the self-space to
their products at Kirana Stores. Retailers are also facing the problem of space
at their stores. Every day 5 new brand sellers approach them. There is no doubt
that the products are good in terms of packaging and quality but without
finding proper retail location one cannot think of bringing it to market for
the consumers. And the retailers have limits on the amount of space in the
store so that they can entertain or not.

More than 70% of new brands are off the shelf
within six months of launch, or at most one year. And those who do manage to
make a living are struggling to stick to the shelf space at those retail
stores.

Many small brand owners are not in a position
to allocate huge market budgets or depute a skilled sales team or expand out of
the region in a short period of time.

The other main issue before the new brands is
to find willing distributors for their products/brand as the distributors are
not interested in selling the new products on credit. Margins are also thin as competitions
also go stiff.  Retailers want new
products on credit terms but if distributors are not able to provide it, one
cannot expect that there will be coverage in the target market. If somehow they
hire distributors in the respective area they are not able to sell them to the
retailers due to lack of FOS (feet on the street) skills and low payment and in
lack of incentives or motivation.

Things
will go on and off but it is time to fix the retail ecosystem by giving it a
centralized distribution system backed by robust IT platforms. It is time to
consolidate the supply chain and make the best use of capabilities and bring
operational efficiencies, then small brands would get a common and unified
platform for their products and would be able to expand into new areas with the
help of aggregation. Things will progress for the better but in the way we do things.

The time is coming for those
brands where you will get a small brand which will have a national presence. He
will no longer be called a regional player.

We are working to deliver
solutions to food and grocery manufacturers and connecting them to a large
network of retailers through a one-of-a-kind block chain solution and
hyperlocal distributions channel

Written by : Balwant Singh Rana: 18.05.2022,
Jaipur

 

 

India can feed the World - A dilemma of Ban on Wheat Export

"India is ready to feed the
world" PM Narendra Modi said on Tuesday, April 12, 2022.
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We should trust the said words of PM Modi. It really matters a lot when
Modi is saying these words and the world is going through a food crisis. On the
other hand, the food crisis in the eastern part of Europe and Africa is getting
worse day by day. Ukraine's major food supply chain was severely stuck after
Russia's invasion of Ukraine. The impact of the war is huge on wheat and edible
oils, although many other commodities are prominent, but wheat is one of the
major commodities that has caused demand collapse across the world.

Ukraine and Russia together contribute
30% of the world's wheat production.

Therefore, the huge share in the supply chain is now clearly visible
everywhere. At the same time, India being the largest producer of wheat has the
potential to feed the world but there are other internal issues where the
greater responsibility is the issue of India's food security. However, our PM
shared his views with the world that India has the capacity and capability to
feed through our natural agricultural produce and in other words can supply
them to feed on a large scale.

At the same time, it was decided by the Government of India to export wheat
and ensure that the gap in the supply chain of wheat caused by the
Russian/Ukraine War was quickly filled and to take the opportunity to dominate
the international market.

This has given us an opportunity to
show our strength to the developed countries.

Undoubtedly more than 7.85 million
tonnes were exported during the financial year 2021-22, and ~1.1 million tonnes
were exported in April, 2022.

It was stated that India could export 10 million tonnes of wheat by the end
of July 2022. Things were going well, the Kandla port became congested due to
heavy traffic of ships and thousands of trucks outside the port. Kandla has a
strategic advantage due to its proximity to the western port and wheat
producing states.

The direct export of wheat has given a big support to the prices, farmers
are getting better rates above the MSP. Things were in a straight line either
way. Once the Indian government opened up the export of wheat, paving the way
for the world where things were coming from India in the best possible way.
Private companies started signing and selling to foreign buyers. You may be
aware that due to the decision of the Government of India and the priority
loading at the load port, exporters of other commodities such as wheat flour,
rice and other commodities have to wait for a month for the birth of their
vessel. In such a situation, they are facing heavy losses, why only because of
wheat and that GOI made on their priority list.

On can compare the prices with MSP. Base selling ex-warehouse rates were
around Rs.2250/Qntl during April, 2022, which was F.O.R. Kandla Rs.2550~ per
quintal.

More than profit to individual
exporters it was a pride that we are exporting Wheat. India is exporting wheat
where we are going to fulfil the hope of countries where food crises is on the
edge. On the other hand, this will give supports to the ambitious words
of PM Modi which he given to world that India is going to feed the world.

But, in between something happened unexpectedly,

On May 13,
2022 the government banned all private wheat exports with immediate effect. It
was not expected that GOI will take this action without

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consulting with the trade bodies. 

My concern is why Govt. of India took this kind of decision. Is there no
worth or importance of Indian exporters who brought tons of value of wheat at
Port for loading to their buyers as per the policies of DGFT.

Is this a decision that only hurt exporters, transporters and shipping
agents? Is not this hampering image of our country?

Still 1.2 million-ton wheat of 2700~ crores is lying at various port areas
as on date or some are saying 2 million ton stocks, however exact figures are
not available on public portals or even APEDA has nothing to share. Amazing
things. At this age of technology, we don't have the exact stocks which are
moved for export and lying at port areas. Unexpected things are making the
noise and hampering our image. 

I have few ethical questions asking to Concern Ministry of GOI:

• Why Wheat
  export is allowed without evaluating the internal facts?


• What will
  happen to nice words of PM Modi which he delivers to world that India will
  feed the world?


• Without
  consulting or going through the facts why Ban is imposed on Wheat export?


•  Who
  cares about India’s image in WTO?

I understand that first of all we should think about ourselves, our
country, but also we should think about our business houses/our exporters and
the people in this ecosystem who have done this through the circular of the
Director General of Foreign Trade. Money was spent on one word. , For those
people, the wheat export circular was not from DGFT, it was from PM Modi "when
he said that India is going to feed the world"

I request the concerned Ministry to look into the matter and before taking
any further steps, request for exemption to those exporters whose stock is
lying in port warehouses and are ready to ship. Most of the contracts are done
on CAD basis, so they will not be able to produce LC at this time. However,
such hasty decisions by the Government of India will certainly bring disrepute
to our country, our business practice and trust.

Written as a commodity analysist and trader by me,

Why Retailer is Cursing Ecommerce & Modern Trade? #retail

Why
Retailer is Cursing Ecommerce & Modern Trade?

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When
consumer is in the center of all activities and their preference is changing
then we should understand that we are in the era of Retail 4.0. Now things are
changing very fast and technology is adding those wings to it. The last half
decade is dedicated to various tech driven startups in B2C, B2B, Q-Com, D2C,
Food Delivery, Logistics Pharma, Fintech and many more areas. There is no doubt
in mind that Indian end consumer is facilitated in many ways and this has made
them lazy and obsessed. So, there we don't need to focus because things are at
the center of all these developments.

Retail 4.0 is a convenience driven sector where
all stakeholders are working on innovations. Here things are revolving around
technology. Most of the startups are driven by technology i.e. tech is their
business and without it they are nothing. When the crowded Apps are creating
demand, ensuring supply chain and providing Fintech services to end users so it
is true that those are the technology drives businesses.

Change
is good and inevitable, and those who resisted they were eliminated by the
market. As far as the current developments in retail are concerned, I am
satisfied that things are progressing rapidly and smoothly. The end consumer
has a plethora of options to choose from, evaluate and make a purchase decision
through the best suitable mode.

Do you know who is the most important link in
the entire distribution channel? You would say distributor but my answer would
be the retailer which is taking the most pain in the entire journey of a brand.
He is the one who is creating the product "brand". Yes, this is a
fact.

Retailers
also got many options to source their merchandise. Earlier they had to depend
on traditional distributors, some price cutters and cash and carry formats, so
dependency was high with traditional channel but in present scenario they have
C&C, B2B, traditional distributors, price cutters etc. This has
strengthened their sourcing and accordingly they can be able to offer some
competitive products to their customers, but they need more focus.

Before I suggest solutions it is unavoidable to
list the problems they are facing in their routine and what has made challenges
for them in terms of their sustainability. 
Here are more than twenty factors which are stopping them to be part of
the development and growth.  

v 
Space
constraint – size of shop is not much to keep the entire product range

v 
Improper
Product Assortment – not able to coup the hyperlocal requirement in fast pacing
changes.

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v 
Hygiene
issue - Lack of cleanliness

v 
Poor
Time Management in Buying and Sourcing. 

v 
Decreasing
consumer footfall

v 
Mishandling
of Product expiry resulting losses. 

v 
Communication
Gap Company to Retailer. 

v 
Competition
from large format Retail stores and walk through stores, E-commerce & now
D2C brands. 

v 
Change
in Consumer Behavior

v 
Manpower
Issue – not able to service home deliveries & other customer oriented
services

v 
Promotion
and Offers not available 

v 
High
Density of Kirana Stores in same vicinity.

v 
Next
Generation is moving out from this business. 

v 
Lack
of IT, not using computer billing & POS.

v 
Limited
Working Capital.

v 
Food
Safety compliance. 

v 
Do
not want to keep records of bookkeeping

v 
Lack
of market knowledge. 

v 
Due
to stand-alone status and no apex body representing them to safeguard their
business. 

v 
No
Banking facility in terms of Credit line as a retailer does not maintain books
of accounts. 

If you're wondering?, that these
are the only challenges at the retailer level, I might have forgotten to
mention more. I sympathize with grocery retailers as compared to other
retailers because of low margins, and they are losing business day by day.

Now, I think "disruption" is the
right word that startups are using and based on that they are getting good
funding. Actually disruption is a big word which is affecting the entire
retailer community and when things happen on such a large scale it is disruption.
So my way of thinking is correct that disruption is tantamount to the
destruction of grocery retailers.

Just like hyperlocal fulfillment is done by
traditional distributors, retailers are doing last-mile connectivity to end
consumers. Consumer-focused ecommerce startups are letting consumers end mass,
burning millions of dollars and diverting the business of these retailers from
them.

I have personally met more than
three thousand retailers so my experience is more than expectations.  Here would like to communicate with people
who has sympathy with the Retailers that we should do something great for them.
 When I met retailers last few months I
came to know that Kirana retailers lost 30-40% of their business volume.  Here are factors which are giving them tough
competitions and are liable to erosion of opportunity from the nearby
consumers. 

 Mentioning the formats of ecommerce those are
consumer centric:

1. ·        
   B2C players 
   they are into Omni channel, hyperlocal, demand bugger, aggregator etc.,
   hybrid
2. ·        
   D2C Brands  
   -  Direct to Consumer
3. ·        
   Q-commerce – Quick Commerce delivery in 10
   minute
4. ·        
   Big Box Retailers – Like Reliance Smart, D-mart,
   Big-Bazar

There
are more than 150 startups operating in this segment, both nationally and
regionally, having their appropriate sized business in their areas of
operation. It is true that D-Mart is a big villain for retailers, a new D-Mart
store is responsible for reducing 50% of the retailer's business and closing up
to 2% of stores. As per my analysis the impact of a DMart store remain in the
radius of 2-3 km. There is no other standalone big box retailer like Dmart that
has so much magnitude to negatively impact the retailers. There are 5-6 D-mart
stores in a city like Jaipur which is quite reasonable numbers that affects the retailer
universe of 2500-3000 unpleasantly. And heard from market that they are
planning to open more stores,  so can
think how rapidly they will take the share of native retailers.

Further, D2C and Quick Commerce startups will impact
the ecosystem in big way in the coming years. They will work on impulsive
buying behaviours of customers. Convenience drivers will be more effective;
However, they will not make money even after ten years of burning in the
ecosystem, but again this will cause turmoil to the other segment in the retail
ecosystem. 14 million retailers are part of the upheaval and after-effects of
convenience drivers.

While
some quick commerce startups have started functioning in Mumbai and Tier I
cities, the impact of this change is visible in the surrounding areas. The
retailer started claiming that they stop seeing their regular customer at their
stores after the 10-minute delivery starts in their area, resulting a 30% drop
in Kirana retailer’s business. “Vijay Bhai (one of the retailer near Blinket
store) in Mansarovar said that 30 of his regular customers have stopped
visiting his store in the last three months. When he questioned some of his
loyal customers, he found out that they were ordering impulsive purchases from
Blinket (quick commerce startup) and getting delivery in 10 minutes. A lot was
heard from the retailers on the said issue.

Literally grocery retailers are crying, they
are facing sustainability issue, they are trying to understand it more. Some
fintech solutions and hyperlocal commerce are trying to give them their tech
tools to generate demand by sending offers and downloading apps. Dukaan,
Snapbizz and other regional players are offering hyperlocal connectivity by
providing last-mile neighborhood commerce applications.  eB2B Food & Grocery Distribution startup “Kirana
King” is working for the upliftment of Kirana Stores and providing them various
services under RaaS.  Still we need
companies like Dukaan, Kirana King and many more startups who are empowering
Kirana retailers not only by giving them supply chain but increasing the consumer footfall at their shops.

We should not ignore them and also should not
left them alone.  In this fast paced development,
they must be in the driving seat and should be protected from the big box
commerce players.

Here I would like to quote a
famous saying of Sun Tzu “

Know the enemy and know yourself in a hundred battles you will
never be in peril. When you are ignorant of the enemy but know yourself, your
chances of winning or losing are equal. If ignorant both of your enemy and of
yourself, you are certain in every battle to be in peril.

This must be applied to Kirana Retailers that
they must know the enemy and accordingly need to equip themselves with better
services and should bring the consumer first approach in their routine. 

Be part of change and ready to involve them for
the betterment of their business & personal life not for the battle work.

Please share your views on the said writeup and
send your valuable comments, forward in your groups and appreciate if written
in good prospects.

 

Written by : Balwant Singh Rana

15.04.2022