Indian retail’s new battle: neighbourhood groceries vs independent modern stores

For consumers, stores such as M.K. Retail in Bengaluru, ELT in Noida and Aksar in Mumbai, offer more options for buying household items, as well as the convenience of being located closer than larger supermarkets.

Data from various independent sources peg the number of such stores at 7,900 to 10,000. As per Love in Store, a store loyalty management firm that works with large consumer goods companies, India had 7,914 such independent trade stores at the end of 2023.

Over 4,300 such stores are located in south India, followed by north India that has over 1,536 such outlets, as tracked by the firm, which works with packaged goods companies that supply to modern trade as well as general, or kirana, stores.

“As per our data, the standalone modern trade store count has gone from 3,000 stores to 8,000 stores over the last three years as a lot of new ones are opening and old ones are converting. This… will go [up] another 1.5x in the next three years," said Aditya Goel, co-founder, Love in Store.

“It is the fastest-growing channel and looks like the target for all major fast moving consumer goods companies," he said.

This despite rising high rentals and quick-commerce digital platforms posing potential challenges.

Such standalone stores typically exist as a single outlet in a neighbourhood or as part of a chain of stores in a particular city. Their growth contrasts with the struggles of smaller neighbourhood stores mainly because of cash-flow issues.

While general or kirana stores have reported low-single digit growth, standalone modern trade stores achieved 12-15% growth in sales in the 12 months to 31 December, according to Love in Store. Goel said more investments will flow into opening up such stores over the next 12 months.

India’s market for fast-moving consumer goods is estimated at $25 billion. However, a bulk of packaged goods such as soaps, tea, chips and soft drinks are still sold via general trade stores.

Hindustan Unilever Ltd, the country’s largest packaged consumer goods company, sells its products across 9 million outlets in India—a majority of which are general stores.

But such stores are under pressure because of an overall slowdown in the packaged consumer goods sector, especially for mass-market products. New general store openings have been on a decline, according to industry observers.

“The rate of new stores opening in general trade has definitely gone down, definitely," said Krishnarao Buddha, senior category head, Parle Products. On the other hand, there is a significant rise in standalone modern trade stores across India, he said.

“Such stores are typically run by second-generation entrepreneurs who may have started with a small kirana store. It works out well for large FMCG companies because they are more flexible with product listing and are eager to on-board new brands, etc., when compared to large modern trade chains that often struggle with an overflow of brands," Buddha said.

“We are seeing a lot of such stores cropping up—they start as single stores and gradually open more in their city or catchment."

Such outlets also draw more discerning consumers. They offer a wider assortment of goods as well as high-margin imported products. As a result, ticket sizes in general are higher. This also means higher billings for companies.

In a recent interview, Suresh Narayanan, chairman and managing director, Nestlé India, too, pointed to the growth in modern standalone stores.

“The number of outlets that are opening of the small variety are gradually coming down in large towns because of the cost of real estate—it doesn’t make sense for you to open a little hole in the wall store in a city like Mumbai. You need a larger-format store, which means that you need deeper pockets," said Narayanan.