Retail's Digitization Boom is Not Leaving Kirana Stores Behind

Despite macro headwinds of inflation, pandemic disruptions, and competition from e-commerce, not only are kirana stores surviving as essential parts of local economies, but also have an opportunity to thrive by digitizing key areas of business

90 percent ($540 billion out of $600 billion) of grocery sales are conducted via Kirana with about 92 percent of the Indian respondents intending to purchase as much or more from their local Kirana store in the future.

Flourish Ventures’ The India Spotlight report is part of its Digitizing the Corner Shop report, according to which, in all four markets (India, Egypt, Brazil, and Indonesia), technology start-ups are providing corner shops with low-cost and online tools which can unlock a more than 60-100 percent increase in corner shop earnings when implemented at scale.

Within the India research, the findings reveal that despite macro headwinds of inflation, pandemic disruptions, and competition from e-commerce, not only are Kirana stores surviving as essential parts of local economies, but they also have an opportunity to thrive by digitizing key areas of business.

“Kiranas are not going away; they are integral to local communities and a significant part of India’s overall retail ecosystem. These small shops are uniquely positioned with their local customers, which we expect will help them hold up under competitive pressure from bigger stores. The small shops can also maintain competitiveness through digitising and automating business functions," commented Harsh Gupta, Investor - India, Flourish Ventures.  

He further added, “Kirana shopkeepers have shown high adoption of digital tools and ambition to use them more to improve store operations and offerings. We see a great opportunity for digital platforms to step in and consolidate parts of a highly disaggregated market while tackling the operational pain points that kiranas face”.

The top factors that drove value for Kirana to its customers were namely, location (86 percent), product quality and variety (51 percent), and longstanding relationships with store owners (42 percent). Additionally, around 33 percent of the surveyed customers regularly use store credit to purchase items.

Despite Kirana stores’ essential role in the economy, shopkeepers still face business challenges, particularly with sourcing and purchasing inventory, managing stock, and serving customers.

Key Highlights of the research:  

• The top three biggest business challenges identified by shopkeepers include finding and keeping customers (74 percent), competitive prices (67 percent), and product variety and quality (57 percent).
   
• The biggest pain points during operational stages included ordering, checking, and receiving products during inventory purchases (74 percent), managing inventory and product placement at the store management stage (60 percent), and attending to customers during the selling stage (74 percent), which can include online channels such as messaging apps.
   
• A vast majority of shopkeepers are already adopting digital tools, apps, and websites to purchase inventory and messaging apps to communicate with suppliers and/or customers. However, barriers to adoption do exist; 26 percent of shop owners reported difficulty in learning or adopting new tools and 16 percent cited monetary costs.
   
• Shopkeepers are eager to adopt more digital tools as they believe these tools can bring business efficiencies. More than half (54 percent) of surveyed shopkeepers said they plan to increase digital tool usage for inventory sourcing and delivery from suppliers in the next 1-2 years.