Accelerating the digital facelift of Kirana stores

Kirana stores play a crucial role in the Indian retail sector, with 13 million such stores catering to the everyday needs of people locally.

The mainstay of India’s retail sector

Kirana stores play a crucial role in the Indian retail sector. The retail industry accounts for 11 percent of GDP and employs eight percent of the workforce, or approximately 43 million, of which the majority are in the unorganized sector such as Kirana stores. In addition, food and grocery (the hot sellers of Kirana stores) account for more than 65 percent of the retail sector in India.

However, with consumer preferences shifting to shopping online or at supermarkets and the rise of modern retailers across Tier I, II and III cities, Kirana store owners are facing the music. By 2021, in just a year from now, the share of traditional trade in the retail industry will likely reduce to 75 percent from the present 88 percent. By 2030, India will mostly be a middle income-led economy, furthering the gap between what customers need and what Kirana stores offer.

At the cusp of a new dawn

Does that mean it’s the end of the road for small retail formats? The recent situation says otherwise. During the national lockdown because of the global pandemic, our survey revealed people turned to local stores for their daily needs. In fact, Small shops were better stocked than ecommerce companies, which were struggling with the sudden disruption in their supply chain. The moral of the story is: There is no doing away with traditional formats. On the contrary, it’s time for retail industry stakeholders to step up support and help Kirana stores ramp up in a sustainable manner.

The success story is on the wall

We interviewed 57 Kirana stores that have already undergone modernization to study the impact and benefits. The results:

Swift improvement in turnover: Store owners report revenue growth of between 20% and 300% with an average of 135 percent. Profits also grew 30% to 400%.
Bigger shopper basket size: As stores modernized, there was a qualitative change in what and how much consumers bought. Low inventory costs: One of the biggest gains for store owners was greater control on inventory, implying the freeing up of cash reserves.

Retailer that have gone the modernization way are enjoying a distinct competitive advantage. More than 76% of them reported a bigger customer base, while 67% said they increased staff strength. A huge 90% of the retailers felt they had more time for themselves. In addition, most of the stores were able to avail more schemes and benefits from FMCG brands due to their classification into modern trade or incentives based on sales achievement.

By the numbers

20-300

percentage growth in revenue, with an average of 135%.

30-400

percentage increase in profit.

A win-win for all

The modernization of small retailers doesn’t just benefit store owners, but also consumers, the government and the industry at large. The math is clear: If stakeholders in the Kirana ecosystem help expedite the modernization process, they multiply benefits for themselves. So, who are these stakeholders? FMCG companies, e-commerce, cash and carry retailers and payment companies, logistic providers and intermediary traders, the government, as well as retail associations and traders—everyone has a role to play. The steps they take now will define the future of Kirana stores and of the Indian retail landscape at large.

The transformation framework

We identify seven systematic steps that can help Kirana store owners evolve into digitally powered retailers who understand their customers and are able to boost engagement and create more fulfilling experiences. We also list nine steps to quickly incorporate Kirana stores into the formal economy. Download our report for details.

Meet the team

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