Why Retailer is Cursing Ecommerce & Modern Trade?
Retail 4.0 is a convenience driven sector where all stakeholders are working on innovations. Here things are revolving around technology. Most of the startups are driven by technology i.e. tech is their business and without it they are nothing. When the crowded Apps are creating demand, ensuring supply chain and providing Fintech services to end users so it is true that those are the technology drives businesses.
Change is good and inevitable, and those who resisted they were eliminated by the market. As far as the current developments in retail are concerned, I am satisfied that things are progressing rapidly and smoothly. The end consumer has a plethora of options to choose from, evaluate and make a purchase decision through the best suitable mode.
Do you know who is the most important link in the entire distribution channel? You would say distributor but my answer would be the retailer which is taking the most pain in the entire journey of a brand. He is the one who is creating the product "brand". Yes, this is a fact.
Retailers also got many options to source their merchandise. Earlier they had to depend on traditional distributors, some price cutters and cash and carry formats, so dependency was high with traditional channel but in present scenario they have C&C, B2B, traditional distributors, price cutters etc. This has strengthened their sourcing and accordingly they can be able to offer some competitive products to their customers, but they need more focus.
Before I suggest solutions it is unavoidable to list the problems they are facing in their routine and what has made challenges for them in terms of their sustainability. Here are more than twenty factors which are stopping them to be part of the development and growth.
v Space constraint – size of shop is not much to keep the entire product range
v Improper Product Assortment – not able to coup the hyperlocal requirement in fast pacing changes.
v Hygiene issue - Lack of cleanliness
v Poor Time Management in Buying and Sourcing.
v Decreasing consumer footfall
v Mishandling of Product expiry resulting losses.
v Communication Gap Company to Retailer.
v Competition from large format Retail stores and walk through stores, E-commerce & now D2C brands.
v Change in Consumer Behavior
v Manpower Issue – not able to service home deliveries & other customer oriented services
v Promotion and Offers not available
v High Density of Kirana Stores in same vicinity.
v Next Generation is moving out from this business.
v Lack of IT, not using computer billing & POS.
v Limited Working Capital.
v Food Safety compliance.
v Do not want to keep records of bookkeeping
v Lack of market knowledge.
v Due to stand-alone status and no apex body representing them to safeguard their business.
v No Banking facility in terms of Credit line as a retailer does not maintain books of accounts.
If you're wondering?, that these are the only challenges at the retailer level, I might have forgotten to mention more. I sympathize with grocery retailers as compared to other retailers because of low margins, and they are losing business day by day.
Now, I think "disruption" is the right word that startups are using and based on that they are getting good funding. Actually disruption is a big word which is affecting the entire retailer community and when things happen on such a large scale it is disruption. So my way of thinking is correct that disruption is tantamount to the destruction of grocery retailers.
Just like hyperlocal fulfillment is done by traditional distributors, retailers are doing last-mile connectivity to end consumers. Consumer-focused ecommerce startups are letting consumers end mass, burning millions of dollars and diverting the business of these retailers from them.
I have personally met more than three thousand retailers so my experience is more than expectations. Here would like to communicate with people who has sympathy with the Retailers that we should do something great for them. When I met retailers last few months I came to know that Kirana retailers lost 30-40% of their business volume. Here are factors which are giving them tough competitions and are liable to erosion of opportunity from the nearby consumers.
- · B2C players they are into Omni channel, hyperlocal, demand bugger, aggregator etc., hybrid
- · D2C Brands - Direct to Consumer
- · Q-commerce – Quick Commerce delivery in 10 minute
- · Big Box Retailers – Like Reliance Smart, D-mart, Big-Bazar
There are more than 150 startups operating in this segment, both nationally and regionally, having their appropriate sized business in their areas of operation. It is true that D-Mart is a big villain for retailers, a new D-Mart store is responsible for reducing 50% of the retailer's business and closing up to 2% of stores. As per my analysis the impact of a DMart store remain in the radius of 2-3 km. There is no other standalone big box retailer like Dmart that has so much magnitude to negatively impact the retailers. There are 5-6 D-mart stores in a city like Jaipur which is quite reasonable numbers that affects the retailer universe of 2500-3000 unpleasantly. And heard from market that they are planning to open more stores, so can think how rapidly they will take the share of native retailers.
Further, D2C and Quick Commerce startups will impact the ecosystem in big way in the coming years. They will work on impulsive buying behaviours of customers. Convenience drivers will be more effective; However, they will not make money even after ten years of burning in the ecosystem, but again this will cause turmoil to the other segment in the retail ecosystem. 14 million retailers are part of the upheaval and after-effects of convenience drivers.
While some quick commerce startups have started functioning in Mumbai and Tier I cities, the impact of this change is visible in the surrounding areas. The retailer started claiming that they stop seeing their regular customer at their stores after the 10-minute delivery starts in their area, resulting a 30% drop in Kirana retailer’s business. “Vijay Bhai (one of the retailer near Blinket store) in Mansarovar said that 30 of his regular customers have stopped visiting his store in the last three months. When he questioned some of his loyal customers, he found out that they were ordering impulsive purchases from Blinket (quick commerce startup) and getting delivery in 10 minutes. A lot was heard from the retailers on the said issue.
Literally grocery retailers are crying, they are facing sustainability issue, they are trying to understand it more. Some fintech solutions and hyperlocal commerce are trying to give them their tech tools to generate demand by sending offers and downloading apps. Dukaan, Snapbizz and other regional players are offering hyperlocal connectivity by providing last-mile neighborhood commerce applications. eB2B Food & Grocery Distribution startup “Kirana King” is working for the upliftment of Kirana Stores and providing them various services under RaaS. Still we need companies like Dukaan, Kirana King and many more startups who are empowering Kirana retailers not only by giving them supply chain but increasing the consumer footfall at their shops.
We should not ignore them and also should not left them alone. In this fast paced development, they must be in the driving seat and should be protected from the big box commerce players.
Here I would like to quote a famous saying of Sun Tzu “
Know the enemy and know yourself in a hundred battles you will never be in peril. When you are ignorant of the enemy but know yourself, your chances of winning or losing are equal. If ignorant both of your enemy and of yourself, you are certain in every battle to be in peril.
This must be applied to Kirana Retailers that they must know the enemy and accordingly need to equip themselves with better services and should bring the consumer first approach in their routine.
Be part of change and ready to involve them for the betterment of their business & personal life not for the battle work.
Please share your views on the said writeup and send your valuable comments, forward in your groups and appreciate if written in good prospects.
Written by : Balwant Singh Rana