A friend who was National Sales Director at a large FMCG / Consumer Goods MNC narrated this story to me almost a decade and a half ago. Their Global CEO was doing one of his State Visits to the provinces. As was the norm, he was taken on a market visit to a few Modern Trade outlets and a smattering of various types of Indian style Kirana stores. The next day in the board room the Global CEO posed a question to his Indian team: ‘Gentlemen, what is the current contribution of Modern Trade to our sales? And what do you think will be their contribution in ten years?’. The team confirmed that Modern Trade was as yet very small, contributing to less than 5% to the overall sales of the company. The consensus was that it will go to 10% in a decade. The Global CEO emphatically said that the number will be more like 20% in ten years. The team was curious to know how he arrived at this magical number. His simple answer was that he would have suggested 2X the number that the team suggested. He based this on his extensive travels, ‘I have seen the way modern trade has grown around the world. In country after country I have seen the local management underestimate the growth of MT. As a result my simple guess is that it will be twice what the local team thinks it will be. So if you had said 15%, I would have said 30%!’.
I have not exchanged notes with my friend at the ten-year mark, but my suspicion is that in this case the local management was spot on. Modern Trade has not been able to steamroll over the humble Kirana store the way it has in many other countries. The phenomenon of a modern format book store throttling a small boutique book shop was vividly portrayed in the movie ‘You’ve Got Mail’; in an interesting twist of fate the big format book store got pulverized by Amazon in country after country.
Coming to our own Kirana store, how have they managed to survive? And what makes them tick.
It is said that India is a land of shopkeepers. We probably have more shops per capita than most other countries. The local Kirana has a deep relationship with the local community. They tailor their requirements to the local taste. Their cost of operations are low especially if they own the premises and live above or behind the shop. Add to this the low cost of labour since the entire family works at the store. They also have the unique ‘Khatha’ system of giving credit and collecting the money at the end of the month.
In his book ‘It Happened In India’, India’s modern trade veteran Kishore Biyani talks about how he wanted each of his Big Bazaar store managers to understand the tastes of the locals and adapt the merchandise to this taste. If there was a temple in the locality, and if there was a festival that is celebrated at the temple, the store should be ready to offer special deals for that local festival. I suppose the fall of Big Bazaar was not due to their inability to ape the Kirana mindset, but due to other operational reasons.
Covid lockdown was a bane and a boon to the local Kirana store. On the one hand they had to tackle the spurt in demand since consumers were worried about entering an air-conditioned modern trade store, and on the other hand there was a challenge of getting the right stocks. In India as in several other countries, local communities suddenly saw the vital role played by the local Kirana. The local shop uncle was there to serve you, when you needed him the most.
Covid in fact separated the not so agile Kiranas from the agile Kiranas. The smarter Kiranas managed to spruse up their shops and convert them into small modern format self-service stores.
Indian Kiranas have also demonstrated a great level of tech savviness. Bar code is now something they are quite comfortable with. Most of them have also adopted UPI based payment systems. They are able to place orders on apps and track their stock movement as well.
As I speak with the Kiranas in my locality which could be termed middle class Mumbai heartland, I also see some Kiranas moving out of general grocery and becoming specialist stores selling items like dry fruits and ready to cook products. No more open food grains for them. They believe that the consumer is going to the local modern trade or online for their regular groceries. Why not move up the value chain and cater to new evolving tastes?
So if you look at a successful Kirana today compared to one ten years ago, you will see that they are bigger, cleaner, better laid out, more selective of what to offer and technologically up there with the modern trade outlets.
Challenges remain.
The biggest challenge is the reluctance of the next generation to take up the shop keeping job. Adoption of technology is one way the older generation are trying to make the task more alluring. Will it work?
One significant change in the last two decades is the growing influx of women into Kirana stores. Not as consumers but as shop keepers and shop assistants. At one time the shop keeper was the quintessential male [Remember the mustacheod shop keeper Vinod Sharmaji ‘Aap Apne Biwi Se Kitna Pyar Karte Hain?’….’ Jo Biwi Se Karta Pyar, Woh Prestige Se Kaise Kare Inkaar’].
Kirana stores managed to battle the modern trade quite well over the last decade. Now they are facing the challenge of Ecommerce platforms. The general consensus is that in the bigger cities modern trade and Ecom are both growing rapidly, and probably eating into the Kirana’s share of the wallet. Kirana is getting squeezed. The smarter Kiranas managed to survive and even thrive over the last decade. Will they be able to reinvent their game again?
Legend has it that Rishi Markandeya was given a short life of just 16 years. But through his devotion to Lord Shiva he managed to ward off Yama when he came calling. The way smart Kiranas can survive is by doing more of what they have been doing over the last decade, become agile and like Markandeya, become more and more devoted to the one god you have, the customer. In a large diverse country like India with changing tastes, there is a market for MT, ECom and the humble Kirana. Each will have to find its own god to get the boon of eternal life.
Appeared originally in Hindustan Times 27 Jan 2024