One of the biggest, but often overlooked opportunities in India is the USD649 billion independent grocery store retailers, often referred to as Kiranas. Suppliers wanting to win in India must build the capabilities around micro-distribution in a market segment that is going digital fast.
Why is the independent food retail sector relevant?
Many FMCG suppliers mainly work with modern retailers to access middle-class shoppers in bigger cities where Indian consumers seek a modern experiential shopping environment. However, 87% of India’s food retail sector is still in the hands of traditional grocers.
This segment will remain large and continue growing in absolute terms, as income increases outpace retail modernisation and additional discretionary income is spent in the neighbourhood. As lifestyles become busier and the female workforce grows, the convenience provided by kiranas, plus the availability of customer credit (based on long-standing personal relationships between trader and customer), will continue to make them attractive shopping options. Therefore, brands must regard kiranas as being a vital link in the national distribution chain.
Understanding the Kirana business model
Kiranas are independent neighbourhood stores trading from very small sales areas (often just 30-40 square metres). They sell an assortment of everyday essentials in food, drink, health & beauty and household care. As service-oriented family enterprises, they typically offer a range of customer-focused services, such as long opening hours (up to 16 hours per day), customer credit and free home delivery. While assortment is limited by store size, kiranas often group in clusters with different individual specialisations, together providing local shoppers with a product variety similar to that customers found in a full-range supermarket.
Kiranas can also be uniquely consumer-relevant as they have detailed understanding of local shopping preferences and habits. Store owners typically live in their catchment area, and shopper relationships have developed over decades and often passed on from one generation to another. Kiranas are also popular with all social strata in India: the average customer has limited purchasing power and even affluent shoppers are not usually profligate spenders.
As Indian megacities tend to be highly congested environments, and with increased workforce participation making for time-poor inhabitants, people prefer shopping within their immediate neighbourhood. This means kiranas are the nation’s leading convenience concept, catering to daily rapid replenishment missions.
To be relevant in Indian neighbourhoods, FMCG manufacturers have to understand what Indian shoppers need in their everyday lives to help retailers avoid shelf-warmers, something kirana owners cannot afford.
Working with kirana stores gives FMCG brands an opportunity to work with India’s modern wholesale/cash & carry operators, avoiding middlemen that often introduce avoidable inefficiencies and unnecessary costs into the system. Teaming with modern wholesalers also allows brands to exert more direct influence on retailer education, in-store presentation and promotional strategies.
Kiranas vs Digitalisation
Kiranas are using many of the same tools as the world’s biggest retailers to develop their stores, including a wide range of low-tech, yet efficient, digital tools. In fact, the modernisation of India’s food retail industry will largely be driven by kiranas.
Increased smartphone and internet penetration across all income strata, the Goods & Services Tax (GST) implementation and the government’s demonetisation initiative are all contributing to progressive digital developments in the retail landscape.
Apps and websites like Amazon’s Kirana Now, AaramShop, LookUp and Grofers are seeking to cash in on the ubiquity of kirana shops to crack the model of hyperlocal delivery. Retail technology firms such as ShopKirana, SnapBizz or Storeking offer IT solutions to help kiranas modernise stores and better engage with customers. These technologies facilitate services like customised bills and SMS alerts on promotions, festive greetings, or – very popular with local consumers - app-based home delivery.
In India, as in China, selling to the mass market will increasingly involve an element of omnichannel. Suppliers must therefore cultivate the internal capabilities needed to navigate an increasingly complex shopper journey and fulfilment landscape.
For suppliers, being relevant in India also means managing the complexity of independent trade distribution, typically requiring a multi-approach strategy involving importers, distributors, wholesalers and direct-to-consumer routes, as well as capability-building in retail customer marketing, engagement and retention.
Planning for an unpredictable future is challenging. PlantRetail RNG offers go to market intelligence to:
- Understand the reinvention of the future store
- Navigate tomorrow’s ecommerce landscape
- Develop the capabilities needed to find growth in a digital world
- Make effective decisions on which markets to invest in
- Target strategies that capitalize on future growth opportunities
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