
Quick commerce is rocketing. So, are kiranas on the way out?

Summary
- Quick commerce strikes at the heart of the kirana business—groceries and daily staples. By sourcing directly from manufacturers like ITC or Hindustan Unilever, the sector can cannibalize juicy margins the traditional retail shop keeps. Here’s what our analysis of government data tells us.
New Delhi: In little more than a couple of years, quick commerce has turned into the great hope of India’s startup landscape. Zomato, Zepto and Swiggy dominate, even as Big Basket, Amazon and others are trying to muscle in. In this beeline for a slice of retail, what’s going to happen to that staple of the Indian street—the neighbourhood kirana store?
When big box stores such as Big Basket entered the Indian market, kirana stores were predicted to be on their way out, mirroring the trend in more developed markets such as the US, where small mom-and-pop shops simply couldn’t compete with the scale and pricing power of a Walmart.
As of 2023-24, according to data compiled by the National Sample Survey, there were around 22.8 million ‘unincorporated’ establishments conducting some sort of trade. The vast majority of these—between 80% and 90%—were specifically in retail trade (kiranas), employing an average of less than two workers. And while the number of such retail outlets grew by about 230,000 in a year between 2022-23 and 2023-24, their count fell by a similar number between 2015-16 and 2023-24.
The government’s Annual Survey of Unincorporated Sector Enterprises (2023-24), the data that was released late last month, covers three broad sectors. These are trade (of which 80-90%, as pointed out earlier, are retail trade shops); manufacturing, and ‘other services’ (establishments engaged in services sectors other than retail).
All these establishments are tiny. On average, they employ barely 1-2 people, including the proprietor. On average, they do ₹3 lakh to ₹7 lakh of business a year, depending on whether they are located in rural or urban areas. The survey does not cover construction firms or the agricultural sector.
In 2010-11, trade establishments accounted for around 36% of all unincorporated establishments. Five years later, and even as late as 2021-22, that share was relatively constant. But in the two years since that share has declined by about 6.6 percentage points.
The declining importance of kiranas in overall retail in India shows up in the macro numbers as well. As of 2015-16, the trade sector, comprising retail and wholesale trade, generated around ₹13 trillion of GDP (or, more precisely, gross value added). Of this, 34% was accounted for by unincorporated enterprises or kiranas, a share that had risen by 4 percentage points from 2010-11. But by 2023-24, this share had fallen sharply to around 22%.
So, are kiranas on the way out? It’s too early to say. The unique economics of quick commerce means that the most intense competition is likely to be felt in specific, highly dense and urbanized large cities, at least for now.
Quick economics
Ultimately, the ‘decline’ of kiranas may have come about from a combination of factors—for example, demonetization rather than just quick commerce.
But as has been widely pointed out, quick commerce strikes at the heart of the kirana business—groceries and daily staples. By cutting out not just traditional retailers but also wholesalers and distributors and sourcing directly from manufacturers like ITC or Hindustan Unilever, quick commerce can essentially cannibalize all those juicy margins and still offer prices below that of the traditional retail shop. The extent to which e-commerce, in general, has affected the retail market in India is indicated by the fact that for a company like ITC, ‘digitally enabled’ sales and ‘modern trade’ accounted for 31% of the company’s fast-moving consumer goods (FMCG) sales in 2023-24, up from 17% in 2019-20.
Zomato’s quick commerce business, for instance, built on the acquisition of Blinkit, saw its average monthly transacting customers rise from 2.9 million in 2022-23 to 5.1 million in 2023-24. In 2023-24, each of its ‘dark’ stores averaged a gross order value of about ₹8 lakh per day. According to a Mint story, a survey by NIQ of 4,500 customers in 16 cities, 31% of urban Indians use quick commerce for their primary grocery shopping.

This is a business driven by cheap labour, especially ‘gig’ workers. They, in effect, implement the core proposition of quick commerce—home delivery of everything from daily groceries to iPhones within 10-15 minutes. At Zomato, for instance, an average of 67,000 delivery workers a month delivered about 203 million orders in 2023-24.
What adds to the bottom line and attractiveness to investors is that, in line with other such platforms globally, none of the quick commerce businesses treat such workers as employees. Thus, they avoid the statutory employment benefits. While such workers are called ‘gig’ workers, they are, in effect, the same as older forms of informal or casual labour, but working for online platforms instead.
Kiranas in flux
Currently, the economics of quick commerce means the biggest bang for their buck comes in dense, urban areas. Here, quick commerce companies can locate their dark stores to achieve a minimum level of business to be viable. According to the All India Consumer Products Distributors Federation (AICPDF), which represents FMCG distributors, around 200,000 kirana stores have shut down over the last year, with 45% of those closures being in metros and a further 30% in tier-I cities.

The National Sample Survey (NSS) data on unincorporated enterprises doesn’t break down the data by metros. While it does have a rural-urban split, that data has not been released for 2023-24 yet. Between 2015-16 and 2022-23, the previous period, retail outlets in urban areas fell by 9.4%, or 1.15 million outlets. Between 2010-11 and 2015-16, in contrast, such outlets in urban areas rose by close to 20%. Interestingly though, in 2022-23, kiranas in rural areas fell by around 56,000 outlets from a year earlier.
What about urban areas across states?
Interestingly, the data shows a mixed bag, with both poorer and richer states seeing an increase in kiranas, and a serious decrease as well. Jharkhand, for instance, saw a 21% increase in unincorporated trade establishments between 2015-16 and 2022-23. But so did Gujarat (19%), a much richer state, over the same period. At the other end of the spectrum, it’s a similar story. Uttar Pradesh, the state with the largest number of such establishments, saw a dramatic decline of 26% over a seven-year period, but so did Karnataka, again a richer state (a 32% decline over the same period).
Employment report
In the normal course of economic growth, the demise of small stores might be less worrying if the workers employed there find gainful employment elsewhere. Unincorporated trade establishments, such as the one surveyed by the NSS, accounted for 39.7 million workers in 2023-24, about a million more than in 2015-16. So, while their relative importance has declined, the sector is still growing, albeit more slowly.
But over the last decade, small enterprises in general—across manufacturing, trade and other services—suffered a series of setbacks. It started with demonetization in 2016, which hit a largely cash-driven economy; the introduction of the goods and services tax (GST) in 2017, and finally the covid-19 crisis in 2020.
This is visible in the NSS data. Across all three major sectors covered by the survey—trade, manufacturing and ‘other services’—growth in value added for the average establishment between 2010-11 and 2015-16 was 9-13% per year. But in the period after that, the average annual growth in value added fell to around 3-4% per year. Even the post-covid ‘bump’ to the rest of the economy seems to have given the small enterprises sector a pass.
With employment in such enterprises, the story becomes more complex. For trade and small-scale manufacturing, it’s a similar story as with value added. The trade sector saw employment grow by less than 1 percentage point per annum between 2015-16 and 2023-24, while manufacturing saw a decline of 0.84% per annum. With ‘other services’ it’s a different story. In this sector, employment actually fell between 2010-11 and 2015-16 but then rebounded strongly in the eight years after, growing at a relatively healthy 3.2% per annum.
Why this contrast? Both trade and manufacturing are struggling in the face of intense competition, one from quick commerce formats, the other from large-scale manufacturing. This competition has always been there, but it has intensified in the last decade or so. In this scenario, ‘other services’ has become a refuge for businesses and workers who have had to exit the other two sectors and have failed to find employment elsewhere, in larger-scale manufacturing or the more ‘organized’ services.
An optimistic prediction might be that the coming fall in unincorporated sector employment will be offset by the increasing use of gig work elsewhere. For instance, a range of estimates predict a huge jump in employment in the ‘gig’ economy. A Niti Aayog report in 2022 predicted that the total number of gig workers (which would include workers in non-platform sectors such as construction) would increase from around 6-7 million in 2020-21 to about 23.5 million by 2029-30. Again, ‘gig’ work is simply another word for workers who are in a more precarious ‘informal’ labour market with little job security or benefits.

As the report itself points out, the share of ‘gig’ workers working in the ‘organized’ sector—that is, large enterprises covered by labour laws and required to provide benefits to employees—rose from 26% in 2011-12 to 38% by 2019-20. “Thus, there is a persistence of informal work relations in the sector. When we read this along with the trends in the organized sector, it can be seen informal work is now penetrating the organized sector workforce through the gig and platform modes of work."
And while the ‘informalization’ of labour in the organized industry was earlier due to the increasing use of contract labour, the shift is now toward ‘gig’ or task-based forms of work, even in large industries, according to the report.
And as this shift picks up pace, it will affect small enterprises to a greater degree, because the earlier competitive ‘advantage’ they had, of not being subject to labour laws because they were too small, is now gone. These are all variables that impact the landscape that kirana stores are a part of—and chips away at their foundation.
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