Oct 4, 2012

Kirana (Grocery) Startup in India is full of Challenges

Today we will talk about problems and challenges in Indian Kirana (Grocery) Retail.  

The Indian Retail sector is one of the most unorganized markets in terms of structure.  As was stated in various studies India Kirana is run by small-2 families, still in its raw form. When we compare Indian retail with western, or other developed countries we can see a big difference. Today Indian Kirana Market is contributing around $450 billion, a big contributor to Indian GDP, nearly 10%, and contributing to employment to the tune of 6%.  But, still, 90% of Kirana retail is unorganized

Running a grocery store in this semi-modern India is no easy task. The economic condition of the consumer is shifting from low to middle and middle to high, accordingly, preferences are also changing resulting in changes in shopping habits and convenience. Tier 1 to Tier 3 people in cities with higher disposable income are finding a way to experience shopping through the category of retail. For people of such income groups, Modern Retail is the shopper’s stop.


Amidst the proliferation of organized retail, something went awry in and around these mom-and-pop shops, and their numbers are dwindling day by day. The aggressive players in offline retail are Reliance Fresh, Big Bazaar, DMart, More, and Vishal, some having 4 to 5 stores in a city through over 100,000 sq ft of space. If I change the location and put the size of the mom-and-pop store then about 1000 stores are equivalent space they are using in a city running 4 or 5 hypermarkets.

Now that offline organized retail is making a noise, e-commerce is also booming. Both Walmart and Amazon's giant e-commerce platforms have now deepened their eyes and started mining biological data to increase the ticket size from Rs 2550 to Rs. 5000/. Despite claiming to have lakhs of retailers joining them, they are not making money. If we talk about Walmart, 40% of the business is coming from retailers but not in investment ratio i.e. millions of dollars are needed to set up Cash & Carry. The average basket size should be above Rs. 5000/- per month when one is catering to the entire market or 70-80%.

According to hypermarket owners "based out in Delhi" - no one can wipe out mom and pop shops from India even in the next 50 years. "We have to build our own consumer base and leave them to their consumer base. We're on it. Why is a section not paying attention? Burning money is not the solution. Indian consumers are unpredictable so don't think about loyalty on their part. When Metro C&C, Carrefour, and Walmart were entering India, they used to say that they are a big threat to retailers despite they were allowed to do business in B2B only i.e. Retailers. This is my honest prediction that after 5-7 years in the near future they will have to pack up their own system from India and they will be forced to sell their setups.  No one can think to wipe out Kirana stores from India.

Based on my one-year-long in-depth survey across 7 major cities of India and hours spent on the streets inquiring about the Kirana retailer's business pattern, future aspects, and their interest, I can predict that the coming year will be a good year for grocery stores. It will be more dedicated to grocery retail and the entire ecosystem. There will be a focal point i.e. grocery retailer. All is going to please them to find the precious space for their products. Even many will try to provide various IT solutions to them like POS, auto-replenishment systems, etc, and accounting systems and VAT management. Also, various banking services from micro banking will come to assist their working capital need.

I can predict based on my deep conversations with thousands of people in 2011 and 2012 that as the consumer is adapting to the changes, they are happy to buy a new package, clean and quality product. In food products, they are less brand savvy. This will revolutionize the growth of private-label brands in India. This means that there will be an influx of regional and local brands in a way but the only challenge for them will remain the "retail space" i.e. retailer, and connector.

So what's the harm if I'm talking more of a grocery retailer? After all, they are  the main connector and channel partner to the brand connecting to the end consumers, without pleasing them how can one think of their brand entering the retail space and how will they go about reaching the end consumers? nobody.

I can see the pain point of retailers and I would ask new entrepreneurs to talk to them about the challenges they face and what solutions they can provide as a business to protect their business.

Usually, the average size of a Kirana store in India is less than 150 square feet but here we will talk about medium-sized stores which are doing business of Rs. 5 to 10 lakhs per month. In this segment, you can find 20% of the shops in the city having 300 sq ft of shop space. Let us take this figure here for the purpose of our study.

I am taking the example of the Capital city of India,  Delhi. Here in Delhi, there are more than 25000 stores running in the different surrounding areas whose size is 200-300 sq ft and if we talk about all the Kirana stores below 100 sq ft then these figures are beyond uncountable, approx. 110000 stores are within 50 km. radius in Delhi

These 25000 stores are major grocery stores contributing nearly 60-70% of the total market size.

I have visited more than 1000 retailers and personally met them and also interviewed them about their business prospects, challenges, problems, and also their personal life, social life, etc. The results were out of the box and it is surprising how these people are managing their regular lives, dealing with more than 150 to 300 products having 1000 to 2000 SKUs and fitting them in their small-sized shop, having regular discussions with distributors/ vendors/salesmen etc. and the difficulty of hours really makes us think and so we can know the basics of their business.  

 Before we go ahead  Let's figure out their shop : 


Now we will talk about the problems and challenges that a Kirana store owner is facing: Based on the personal interview of retailers, I found that they are facing numerous problems and running their small shops almost seating on the future challenges.

  • Space constraint
  • Improper Product Assortment
  • Hygiene issue - Lack of cleanliness
  • Poor Time Management in Buying and Sourcing. 
  • Decreasing Footfall
  • Mishandling of Product expiry resulting losses. 
  • Communication Gap Company to Retailer. 
  • Competition from large format Retail stores and walk-through stores. 
  • Change in Consumer Behavior
  • Manpower Issue. 
  • Promotions and Offers not available 
  • High Density of Kirana Stores in one vicinity. 
  • Next Generation is moving out of this business. 
  • Lack of IT, not using computer billing & POS.
  • Limited Working Capital.
  • Food Safety compliance. 
  • Do not want to keep records of bookkeeping and due to
  • Lack of market knowledge. 
  • Due to their stand-alone status and no apex body representing them to safeguard their business. 
  • No Banking facility in terms of Credit line as a retailer does not maintain books of accounts. 

The problem mentioned above now leads them to  this picture:

They are facing more than 20 types of issues, so do you think they will have a solution for these problems or is there someone who says:

Last week I spoke with a senior executive at Walmart, they are in the process of developing a retail-oriented model in which they will provide their various products from their centralized centers, as well as create a credit line with banks or financial institutions. are planning to do., In terms of volume purchase discounts, QPS, and other offers they have started giving to the retailers. The sales team is going to the market and takes orders from the retailers. But even then, a major problem is the credit facility that retailers currently get from traditional distributors.

I have gone through various analyzes and since 2009 I am working on this project but there I have not found any solution to save their life. I mean when big retail players are opening their stores in almost every corner of the market, most of the retailers who have money and vision are converting their stores into modern outfits.

I have a plan that how they will be saved from such stiff competition and what kind of solutions will work for them. My concept  “Pragati” is almost in the business model stage and looking for investors who can give their 15-minute time to go through my business Plan. It will be more suitable for companies like Flipkart or companies who want to start retail offline to online.  A franchise model will give a uniform name to unorganized retailers, by giving this uniform name they will be open to the market.  They will have the power to drive consumers to their Stores.  Brands will be waiting for their turn to exhibit their products or get dynamic shelf space, more consumers can place orders from their nearby store and they will be delivered within 15 minutes. It will be Quick.  There will be numerous revenue streams if anyone can go through my model.

Their concern comes from the outer side but they are unaware of the inner flaws.  

Journey continued..................

04.10.2012 (published)


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