With the new policy guidelines for e-commerce players, the battle to woo customers by burning billions and the era of unsustainable deep discounting might soon change. In recent years, the cost of customer acquisition for online retailers have soared higher leading to huge cash burn rate and mounting losses. The new policy may lead to e-commerce players making course corrections in their operations and structures, and eventually may lead towards a more profitable and sustainable business model for them. At the same time, it will safeguard the small businesses and traders, especially the kiranas against predatory pricing that was affecting their livelihood. Government of India’s policy intervention has facilitated a more level-playing field for these businesses and created a non-discriminatory and competitive environment.
In India, close to 12 million small mom and pop stores — kiranas —dominate the domestic grocery retailing with a whopping 90 per cent share. After agriculture, it is the largest source of employment generation and livelihood for millions of local entrepreneurs that bridge the gap of employment challenge in our country. Some of these kiranas are so popular that you have generations of a family shopping from them. The online disruption has been hurting their profitability for some time. But despite the competitive battleground of swanky supermarkets, modern retail and e-commerce players, the kirana eco-system have continued to fight back. So what makes these local kiranas stores thrive and remain evergreen?
People in India still rely on their neighbourhood kiranas for their daily essential needs. A runner from the local store does free delivery for a small product pack in less than an hour. They even provide a handy credit facility to their regular customers. You can never beat a kirana owner’s understanding about the consumption pattern of a local community, their accessibility and variety of locally relevant goods they stock up. For customers, it is the convenience of shopping that is the key. The biggest arsenal for kiranas is their business model; it is much simpler to set up a kirana shop with lesser stock keeping units (SKU) vis-à-vis a retail store with huge capital cost and inventory.
Kirana stores fuel a culture of entrepreneurship and any effort that boosts entrepreneurship will create employment opportunities. Hence, it is essential to empower them, upgrade their traditional methodologies and train the store owner and staff with assortment selection, planograms — effective product placement, for them to improve their margins.
There are several technological solutions to mainstream kiranas. The more sustainable solutions being digitisation, modernisation and a remodelling of stores, POS (point-of-sale) billing, app based digital payment, back-end integration of kiranas, competitive pricing with discounts for them to stay relevant in the retail landscape. The POS system enables kiranas to track sales, revenue, inventory and customer preference like any modern retailer. Digitisation is just one step; there is much more the industry can do for these stores to thrive and complement online businesses.
However, despite the influx of technology, we as customers still prefer a human interface. Kiranas enjoy a deep level of trust and personal relationship with their customer which is a key differentiator for them to dominate the consumption market.
The author is MD & CEO, METRO Cash & Carry