IIM Bangalore’s Prof. Seema Gupta cautions that the enthusiasm of e-commerce firms to empower kiranas with technology is only a temporary one. From the perspective of e-commerce firms, partnerships should either increase their sales or reduce their operating costs. It is not clear as to how that will happen. Feel good factors like customer relationship & geographical proximity cannot drive hard business decisions and investments.
TPCI: What is your view on the unique attributes of the Indian kirana store ecosystem? What has enabled it to survive the test of time, even as the Indian retail landscape has been in a state of constant flux?
Prof. Seema Gupta (SG): The Indian kirana ecosystem offers convenience of buying in small quantities and on demand as most Indians have smaller ticket size due to lower purchasing power. It also works on relationship and customer service as kirana stores know customers by name and offer free delivery at home of even small quantities.
TPCI: What are the key issues that kirana stores are facing with the entry of e-commerce players? How has it affected their business model and sustainability?
SG: The key issue is the discounts offered by e-commerce stores. They also have larger variety and assortment, hence giving better choice. Big economical pack sizes are often available with e-commerce stores leading to some savings for customers. Kirana stores rely more on daily items such as eggs, bread, butter and cheese, which typically have low ticket size as well as margins. Sales in kirana stores have reduced as customers are placing orders with e-commerce too, thus making some stores unviable for lack of adequate demand.
TPCI: What advantages do Kirana stores have vis-a-vis e-commerce players? How has the Indian customer pattern transformed across economic classes over the years, when it comes to buying daily essentials?
SG: Purchase in small quantity is possible. Often these shops are in lanes and by lanes having low rentals. They do not offer any discount and hence get to keep full margin. They can build relationship with customer as they meet face to face and know all customers by name. The living standards have been increasing across segments. For example, instead of basic biscuits such as Parle, people are now preferring indulgence products such as Hide and Seek or Cream biscuits. People are also preferring branded products. They also want fresh products. Most of these products are not planned too much ahead of time and hence are purchased on impulse or need.
TPCI: What kind of synergies can be explored as e-commerce players and retailers plan to come together? What could be the mutual points of contention?
SG: Marketplace model did not work in grocery. Grofers had to switch from marketplace to inventory model. Many companies such as Zopnow have shut shop. Amazon Now is surviving because of deep pockets. So e-commerce will have to look for some other business model integrating with kirana stores. My gut feeling is that the enthusiasm of e-commerce to empower kirana stores with technology is only a temporary one. Right now e-commerce needs kirana stores and the latter is really the king currently. But when the tables turn it will be back to square one.
Kirana stores need technology to manage their inventory better. They can be integrated at the back end with e-commerce companies so that customers’ orders can be fulfilled. E-commerce companies can get the physical proximity with the customer through kirana stores and build relationships. However, both are yet to find a synergistic model where both can flourish. Right now it’s imposed due to COVID. In normal circumstances, a clear and viable business model of partnership is yet to be found.
TPCI: What technological interventions and operational changes can help kirana stores be in sync with the times, be more responsive to consumer needs and effectively compete with the larger players (online and offline)?
SG: Technology for inventory management system to reduce pilferage, have just-in-time delivery and reducing inventory costs – are some such changes that are the need of the hour. Linkage with e-commerce will provide bigger assortment.
TPCI: What will be the challenges and critical success factors for e-commerce companies looking to partner with these kirana stores in a big way?
SG: Clear benefit to e-commerce is still elusive. Partnership should either increase their sales or reduce their operating cost. It is not clear as to how that will happen. Feel good factors like customer relationship, geographical proximity cannot drive hard business decisions and investments.
TPCI: How has e-commerce aligned with traditional retail in the developed world? How will India’s journey be different?
SG: Developed world has more organised retail. India has more kirana stores. Some will become unviable due to decrease in sales. Some will sustain such as stores in campuses and apartment complexes. But they will work on lower volume and higher margin, limited assortment and daily essentials. They will adopt more technology and have better forecasting of customer demand. With better inventory management system they will be able to retain some purchases. But customers will split their purchase between the two. While specialty items and monthly purchases will happen through e-commerce, daily essentials and emergency products will be bought from kirana stores.
Seema Gupta (https://www.profseema.com/) is an Associate Professor of Digital Marketing at IIM Bangalore. She conducts digital marketing training, provides consulting and does agency fulfilment for companies. Prof Gupta is the author of popular textbook Digital Marketing published by McGraw and is a keynote speaker to many high profile digital marketing summits and panel discussions. She is also a visiting faculty of digital marketing at ESAN University, Peru and EGADE University, Mexico.
With more than 10 years of experience in digital marketing, she has trained both CXOs and senior professionals of companies such as John Distilleries, Arvind Brands, 3M, Aranyani, Union Bank, Lifestyle stores, Harman, Naturals, Adobe, Hersheys, TV Today, Lintas etc. She has consulted for companies such as KW Group, Mapsko, INDCOSERVE, Gaursons, Nilonu2019s, KHSDRP, NVT group, Karnataka State Seeds Corporation etc. You may also listen to her views on how to come back from Corona at https://www.youtube.com/watch?v=NpGR5jV2T6k
