Retail: Survival Strategies of the Kirana Retailer

ICRIER Report on Organised Retail: http://www.icrier.org/pdf/Working_Paper222.pdf


I have been arguing in my writings that the threat to kirana stores in India does not exist, and that the 2 can co-exist.... interested parties may refer the above researches that have been conducted in India circa 2008 & 2010. I admit that these are a bit dated, and might need to be re-validated. However, I have not observed any difference in any of the cities in which I have made queries and observations; the trend seems to be the same as before. Not one of the small retailers I have spoken to in any city has told me of a decline in business volume or profit.

The key finding of the report are encapsulated below:
1) An initial fall of 23% in terms of volume. This loss is made up in the subsequent years
2) No evidence of a decline in overall employment in the organised sector
3) Closure rate of the small kirana store @ 1.7% due to the Organised Retail Phenomenon. Total Kirana closed were @ 4.2%. Out of this 4.2%, only 1.7% were due to organised sector factors
4) Competitive response from traditional retailers through adoption of technology and improved business practices
5) Extension of credit to customers

Far more interesting is the anaylsis of the impact of / on customers
1) Increased Consumer Spending
2) Proximity is a major advantage of the small retailer

Increased Consumer Spending
This is something all of us should have observed! We do tend to pick up far more items when the full range is displayed in front of our eyes: that 10-rs pack of chocos; those cakes and tit-bits; small tinkers that we spot on shelves; the odd item with a deal too good to refuse; the latest kitchen gizmo; that shiney kitchen aid; that bunch of hankies we dont need; all those lovely toys for the kids... the list can be endless.

Proximity
An Organised Outlet will be at least a km away - if not more. The very fact that the local kirana store is right next door is in itself a powerful advantage. This is particularly important since needs arise in a normal household practically everyday. Further, quite a few items are usually forgotten in our trips to the mall - or the brands we need are not available.

Both the above do not explain why is it that kirana concept is not only surviving, but also thriving. The adjustments made by this category can be said to be:

1) Convenient Timings
2) Credit Facility
3) Lower wait time in-store
4) Personalised Service
5) Smaller Pack Size Availability
6) Consumer Goodwill
7) Home Delivery
8) Facility of open goods: loose sale of packaged goods
9) Local Brands Stocking
10) Knowledge of Consumer Preferences
11) One-stop shop concept, with a wider range of products being stocked - viz. stationery, batteries, bakery items, snacks and sweet meets, ice cream, soft drinks,
12) Friendly replacement and return policies
13) Innovative new products especially in impulse categories
14) Perishables like milk - esp home delivery on coupons
15) Bill payment support to nearby households and other services
16) Stocking of all new product launches - faster than even the chains

The above small items, taken together, are creating a powerful force that is retaining the customer profile. On the customer front, what is happening is that the share-of-wallet, which was earlier 100% to the local kirana market, is now being shared between the organised retailer and the kirana merchant in a few segments of the market. For the lower segments of the population, the facility of smaller pack sizes, loose goods and credit are together ensuring stickiness. In fact, these last 3 factors are powerful strategies, given India's demographic and income profile.  As an example, I have frequently found that a 100g pack of my brook bond herbal variant of Red Label is not stocked by malls. I can think of quite a few other similar cases...

The other major factors in the equation are
1) Increased Consumer Spending
2) Increased Prices
3) Increasing Households and Population
4) Increase in Per Capita Income
These factors are growing the overall market: which is creating space for all the players!

Comments

  1. I just want to appreciate your work. Excellent work, In other words we can say nicely executed. Keep sharing. Thank you.
    Herbal Potpourri

    ReplyDelete

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