A thing I fondly remember from all my childhood visits to a Kirana store is the scolding I got from my mother for digging my tiny hands into those huge sacks of rice and pulses, grabbing them by the handful, and experiencing this fun sensation; I call it “the tactile version of ASMR.”
I also recollect nagging my parents to get me a KitKat from the confectionary glass box at the cashier’s counter.
The convenience of e-commerce grocery is superb, no doubt, but shopping from your neighborhood kirana uncle had a charm of its own.
Okay, maybe I am nostalgia-tripping a little, but kirana stores really are an integral part of the country's socio-economic fabric.
India’s retail grocery market size was worth $800 billion as of March 2023, making it one of the most lucrative grocery markets in the world.
But post-liberalization (1991), even though the idea of a large urban middle class enticed prominent global supermarket players to enter the retail market, Indian markets have proven challenging, to say the least.
Organized modern trade (MT) is now roughly 10% of India's retail market share, but kirana stores continue to rule the roost with an 88% share.For context, retail in India is broken up into three sections:
- Unorganized, local stores, from electronics dealers to hole-in-the-wall kirana shops, collectively called “general trade” (88%)
- Retail brands and chains such as Big Bazaar, Easy Day, D-Mart and Reliance Retail, which are called “modern trade” (10%)
- E-commerce (2%)
But before we make fleeting projections about when or how MT or E-commerce will take over general trade, let’s understand what factors have made general trade (kirana shops) integral to our economy so far.
1. Community
The kirana stores we see in urban areas evolved from the local village markets and agricultural fairs. A farmer’s produce is sold to the markets of nearby towns and villages by aggregators. The supply chain of many grains, pulses and spices in a kirana store is facilitated by the owner’s relationships with producers at the village level.
The kirana store owner, at times, belongs to the village from where he sources produce. But more importantly, a kirana store owner is plugged into the lives of the community that buys from him. The locals living in close proximity may be buying from the same kirana store for generations.
Without the need for an algorithm, the kirana store owner is well aware of every customer’s needs and wants because of this proximity. The relationship is like an extension of the family, and the service is personalized.
From what I recollect, kirana shops have offered home delivery of groceries way before e-commerce came into the picture. The kirana store you frequented would magically make products appear even if they weren’t available at the time of buying, as elucidated by this anecdote —
“Shafi Stores in Bandra is one of those who has everything. Late last year, I needed fresh cream, at the very last minute, for a recipe. Not one single quick delivery app had it in stock. I called Shafi, and he simply said, “Paanch minute.”
Recently, I tried my luck whilst getting groceries from Shafi. I asked if he had balsamic vinegar. He said, “Kal aayega!”
I will never find out if he was going to get it for me or if he was restocking his inventory because promptly the next evening, there was a bottle delivered home with exact change.”
Consequently, kirana store owners also become trust troves for the community.
Saathealth, a health-tech startup building AI-powered tools for healthcare. companies, reached communities in Mumbai with the help of kirana stores, resulting in 85,000+ app downloads.
“Underserved communities in urban centres don’t have access to malls or supermarkets. For them, it’s the kirana store which services their basic household needs.
Instead of sending health workers into these areas, the Saathhealth app developers targeted the local kirana shop owner, who is often a trusted member of the community.”
— Aakash Ganju, Founder – Saathealth
Familiarity and trust nurtured over years of shopping make kirana stores gain a unique kind of competitive advantage.
2. Credit
If you’ve lived in a hostel at any point, you know what I am referring to here:
Udhaar.
Udhaar (or credit-based selling) is India's own native buy-now-pay-later scheme used by kirana stores and paanwadis.
Kirana stores allow their long-time customers to buy groceries on a weekly or monthly credit cycle, further solidifying trust-based exchange.
Also, other than exhibiting trust, credit-based selling organically retains customers because a customer who cannot afford to pay upfront will invariably buy from the store that allowed delayed payments. And even though credit-based selling may come at a cost to the kirana store owner, their business model is uniquely suited to service this arrangement.
MT or e-commerce cannot service this need easily because of the scale at which they operate. They cannot afford such a structure by design, thereby being unserviceable to around 22% of households in India.
According to this report in The Economic Times, this 22% earns less than ₹1.5 lakh per annum, which works to around ₹3,125 per capita per month, assuming a family size of four, or a little less than $2 per day per person.
Credit-based sales, therefore, make kirana stores an indispensable part of retail sales in the country, catering to a huge chunk of the population.
3. Curation
The constant exposure to the same group of customers allows the store owner to nurture and nudge specific tastes within the community.
Based on your previous buying history, the store owner can authoritatively recommend a new brand of products. The kirana store owner can carry out preference research for a new brand more effectively because they can gather direct feedback on the product.
They can also negotiate with a new brand on behalf of their customer base, facilitating dialogue between brands and local customers that would otherwise be difficult to establish due to a language- and culture-barrier.
Unlike e-commerce, customer service is not a task separate from daily operations for a kirana store owner. Hence, over time, their personal algorithm gets attuned to the locals' tastes and preferences in a much richer and higher resolution way than what simply tracking purchase behaviour on an app can manage. Their proximity to customers doesn’t just create a strong affinity, it also gives them better visibility of a customer’s thought process.
They are known to tailor their recommendations based on our regular shopping,
“Madam, ye naya aaya hai, aapko achcha lagega.”
(Madam, this is a new product. You will like it.)
And they do get it right! We can call our kiranawala, say we’re calling from 4/43, then say “Bhaiyya doodh bhej do 2 litre,” (Please send 2 litres of milk) and our preferred milk, whether it is regular or A2 — Amul, Nandini, or Gowardhan — shows up at our door with the exact change to be returned.
All this curation makes the customer's decision-making simpler, thereby improving the stickiness of a kirana store.
Given the kind of competition kirana stores have survived so far, it is crucial to understand the factors that help them keep modern trade at bay.
Firstly, there is a vast difference in the operation costs of a kirana store when compared to an MT store or an e-commerce grocer. Kirana stores stock in urban areas have limited stock-keeping units (SKU’s ), between 1100-1500 when compared to the extensive SKUs of MT, which range between 2,500-3,000 SKUs. The SKU figures of a kirana store in rural India are lower.
Lower SKUs are possible because the kirana owner has a better handle on the products regularly bought by their customers. They're better at demand forecasting and hence have less cost of inventory/holding inventory.
The low-cost advantage enjoyed by a kirana store also applies at the sourcing stage, where familial ties with suppliers exist —
“Rarely does a kirana owner sign an annual supply contract with a traditional wholesaler of, say, cereals. It’s just that his grandfather used to buy from the supplier’s grandfather. It might look like multiple kiranas in our neighbourhood are competing.
Yes, they compete, for retaining their customers. Scratch the surface and we find them to be cousins, cooperating in a range of activities like buying and shipping, getting the best deal, knowing which wholesaler has stock and can fulfil fastor hiring an extra pair of hands. That’s deep ties at work. The result is that they are better able to adjust to shocks in the supply chain.”
Unlike MT stores which depend on wholesale distributors for stock, kirana store owners usually diversify their buying between wholesale distributors and traditional channels established by their ancestors. All of this adds to the cushioning a kirana store owner enjoys from a supply perspective.
You will also notice that most kirana store owners have a smaller staff than a modern trade store. The size of the store and limited SKUs enable it to function smoothly with a small staff, further reducing the cost of operation. And operating as a small business unit without any focus on scale allows kirana stores to do business in the long term and profitably. Its size allows it to operate frugally and remain competitive in the retail market.
However, some of this survival is also possible because Indian kirana stores operate informally and are therefore not taxed.
This fact has drawn a lot of attention, and ways to formalize the business model so that it can make tax contributions is something the government is deliberating upon. Will formalizing kirana stores threaten their survival? This is something that remains to be seen.
But since the last twenty years, given the advent of modern trade and e-commerce retailing, the survival of kirana stores highlights how useful keeping one’s ear to the ground can be. Moreover, it highlights one of the most important aspects of business:
People buy from people.
MT stores do have staff placed at all the aisles within the store, but the interaction is limited to asking where a certain product might be. It is less personal than your interaction with the kirana store uncle. Modern D2C brands have also attempted to humanize selling with the help of influencers on social media, but it is not customized as much as the kirana store owner recommending a new brand of jam, specifically to you.
In many ways, how kirana stores have evolved over the years is unique and not exactly replicable by modern trade retailers or e-commerce retailers precisely because a kirana store is fully embedded within the context of a small set of customers only it caters to.
Scale is a double-edged sword.
What do you think?
Write back to me with your thoughts, or send me pictures of your go-to kirana store!
