Opinion
New-age, self-service kirana stores are transforming India's retail dynamics
Summary
- A new generation of kirana store owners is tucking into independent, self-service, modern retail stores with gusto, propelled by rising consumption boom, improved supply chain efficiencies, deep penetration of digital payments systems, and an unmatched understanding of the customer
India's consumption heavily leans towards essentials, with food and groceries comprising 50% of retail intake. Over 1.2 crore traditional stores, known as kiranas, dominate with a 90% share of the Indian grocery retail market. Meanwhile, organized retail, or modern trade, introduced about two decades ago, has gradually expanded due to its vast product range, self-service, and shopping experience.
The differences between modern and traditional retail centre on store formats, product range, technology, and digital integration. Modern trade is viewed as tech-forward, while traditional trade embodies community-centered, credit-driven operations.
However, with India's economic growth, digital evolution, and societal changes, kiranas, too, have been evolving. The "independent self-service store", an avatar of traditional trade, has grown rapidly in recent years, propelled by consumption increases, supply-chain enhancements, digitization, and a burgeoning partner ecosystem.
This consumption surge links back to a tenfold increase in per capita income from ₹15,000 in 2001 to over ₹1.5 lakh in 2021. This rise in income has been accompanied by a proportionate jump in consumption expenditure from ₹13 trillion to ₹123 trillion in the same period. It has led to an explosive growth in packaged goods which is expected to reach ₹10.13 trillion in 2025. The packaged foods industry has also seen evolution of multiple categories like instant foods, frozen foods, dairy, snacks, beverages, cooking ingredients, and health foods. And a shift from cereal-driven diet to a protein-rich diet with milk and value-added milk products emerging as biggest commodity in value.
Similarly, home and personal care category has also exploded, with the market growing 3.5 times from 2010 to ₹1.23 trillion in 2022. The rapid growth in grocery, home care, and personal care products has led customers to yearn for more choices. Customers are no longer happy with few stock keeping units and the local kirana stores are now under pressure to upgrade to a larger range of products.
Additionally, improved road infrastructure and the introduction of GST have optimized supply chains. Brands have furthered this by building efficient distribution systems, making even premium products accessible in remote areas.
Another contributing factor has been digital adoption, which through the rise of smartphones and payment apps, has transformed business operations. Small businesses can now engage customers, conduct marketing, and facilitate home deliveries digitally, functions previously limited to big corporations. Furthermore, the IT boom over the last two decades has facilitated the digitization of kiranas, even in remote areas. Local innovations ensure that products and services tailored for modern trade are accessible at low costs.
Due to local enterprises, hardware items like chillers, freezers, and price communication signages as well as specialized services like catalogue management, pricing systems, and customer relationship management are available with small investments. Furthermore, national and regional brand manufacturers have made packs available for stand-alone modern trade stores in line with the requirements of technological revolution.
The changing social landscape is also influencing kirana owners. The demanding nature of traditional retail, often requiring long hours and few breaks, is less appealing to the younger generation. They're either seeking different careers or modernizing their stores for a better work-life balance.
Thus, social status upgradation is also a reason for the younger generation of retailers to venture into opening independent self-service stores.
What is the takeaway from the rise of independent self-service store which have much lower overheads and truly hyper-local in providing services?
Considering the rise of independent self-service stores, there are now over 25,000 such outlets, predominantly in towns with populations under 50,000. The southern region, especially Chennai, is leading this transition. These stores effectively blend the best of both retail worlds.
Independent self-service stores benefit both consumers and brands. Consumers get a modern shopping experience locally, with a diverse product range. Large brands can offer a broader product spectrum and gain valuable insights since these stores willingly share customer data.
The rise of independent self-service stores will impact the organized modern format retailers struggling to grow their market share above 10% of the overall retail sector. Independent self-service stores will give stiff competition to large retailers and will also continue to co-exist with other retail formats. In summary, the independent self-service store is not just a passing trend; it's a significant evolution in India's retail landscape.
Kamaldeep Singh, president, Dealshare, and former CEO, Big Bazaar; and Abhishek, professor of marketing, IMT Ghaziabad
