Is Kirana Retail dead? David vs. Goliath

For the first half of my life, I grew up in Tamil Nadu Housing Board Quarters in Chennai which had odd 800 tenements. Lloyds Colony at Royapettah, close to the Marina Beach came up in the 1960s when Late Shri. Bhaktavatsalam was the Home Minister of former Chief Minister K. Kamaraj's cabinet who’s primary motive was to provide affordable rented houses for the EWS, LIG & MIG of the state. The houses were owned by the Government of Tamil Nadu and houses were allotted to users on a rotational basis. Within the entire housing complex, there was a one commercial complex, a school, a community center for weddings & events, a park, a milk vending booth, a library, two playgrounds and about 400 trees. Yes, you read that right – 1970s. And the complex had a few shops allotted for various vocations such as carpentry, automotive, Public Distribution Scheme centers (for Ration products) and most memorably a Kirana Shop (Provisions Shop). That the shop owner was our immediate neighbour and a family well wisher was an advantage for me as I used to visit the shop as a child quite often to pick up some thing or the other and the Uncle would give me a toffee or two once in a while.

I remember vividly collecting newspaper copies of “The Hindu” which had a full page Advertisement in the early 90s when Pepsi launched in town and one could get a sample 100ml RGB against the paper clipping and we exchanged several of these at this particular shop which functioned in the name and style of “Murugan Stores”. Guess, the seeds of Retail and Consumer Business was sowed in my heart in an early age, unknowlingly. Or by design. And hence my nemonic, "Retailer by Profession and Choice".

So, when Subhiksha Retail stores started expanding in the late 90s along with a bunch of new age airconditioned super markets in the “Mecca of Retail” that is Chennai including my alma mater and first job at RPG run Foodworld, conches were blown that this was the death knell for small and marginal kirana shops. Around the new Millenium, larger corporates such as Tatas, Birlas, Rahejas among others entered in to business of Organised Retail and we saw formats such as Supermarkets at Neighbourhoods, standalone Hypermarkets as well as those in basements of Malls and so on, Big Bazaar being the most popular such chain across India over the past 15 years and is India's largest Hypermarket chain. Once again, naysayers blew the conch that this would be the death knell for Kiranas. 

Then came the likes of Big Basket followed by small dotcom companies such as PepperTap, Grofers (including Oyethere.com founded by Your’s truly in 2015 and made strides) where the conch was blown yet again against the Kirans. 

Yet, amidst all this hullaboo, the Kiranas are standing rock solid with their determination, continued efforts to modernize & upgrade and of course, sustain their business with changing times by adapting to the new normal. 

Covid-19 is yet another opportunity for the Kiranas who form the backbone of India’s FMCG retail industry. With over 13 million Kirana shops across India, the Industry employs over 50 million people directly and indirectly including shop management, logistics such as first mile (from factory), middle mile (to Distributor points) and last mile (delivery of goods to Retailers / Consumers). Other than this, the Organised Retail Industry is estimated to employ a million or so staff members. The Share of Kiranas in Grocery & Household / FMCG Retail is approx. 90% which over the past 100+ days during Lockdown has increased to, perhaps say 98% since most Organised Retail stores were shut and E-Comm players remained non-operational or marginally. 

I have been saying this for over 15 years – in this battle, Kiranas are the Goliath. 

It’s almost impossible to get them off this equation – not because they outnumber organized retailers on a ratio of 9:1, rather because of the proximity that they enjoy with the end Consumers and the longstanding relationship they've meticulously built. 

According to a recent study by E&Y, over 40% of Kiranas have imbibed the Digital route including collecting online payments through Google Pay or PayTM as well as delivering through e-comm apps. Agility and Adaptability are the two main traits that these small business owners display, which is also the bane of larger companies and corporates who's employees work for a salary while the small entrepreneurs work for a living and especially to earn for the next meal. Makes a lot of difference in their approach, isn’t it.

100 Days of Employment

It’s ironical that I am writing this article on my 100 days of Employment from home. So be it. Out of the 100 days, 25 have been Work from Home, a first of it’s kind in my 2 decades of being employed. The first day of my job and almost everyday thereafter have been on the shop floor, meeting, interacting and solving consumer challenges – from helping them to choose the right merchandise to closing a sale, somehow. But the last 25 days have been very different, thanks to Covid-19 Crisis and the ensuing lockdown. More on that later.

 

Mid-December 2019, I was lounging with my classmate who had come to India for a vacation. We were at Westminister, Crowne Plaza (though we still call it as Park Sheraton) which is our favourite hangout for the past 20 of the 24 years we have known each other since studying UG together. The Waiter who used to serve us way back then is now the F&B Manager of the Hotel, something that makes us feel happy that everyone around us has been growing. I received a call from an unknown number and the caller identified himself as an HR Consultant and spoke briefly about a Coffee brand. In the next 24 hours, my tickets were booked to Bangalore for a face-to face Interview with the Management and in the next 7 days, an Offer Letter was sent while I was on vacation at Jim Corbett National Park for Christmas holidays. Things moved very fast, to my own surprise but that’s how God’s grace has always been. He surprises us without even us realizing what He is up to. I joined the company on 3 Jan., on my Father's Birthday!

 

I completed 100 days recently at Levista Coffee as Vice President managing Sales, Marketing, Supply Chain, Logistics and everything in between. It has been a very short tenure yet, but a very fulfilling one. Be it setting up a Corporate Office from scratch (Furniture, Interiors, what not), to plan a detailed Business Plan for the next 24 months as I lead the company to greener pastures with a vision to accomplish 5% Market share of the Rs. 2,200 Crore Instant Coffee Market annually in India of which 80% is held between HUL and Nestle, who’s majority of business comes from Southern India. I have been fortunate to interact with executives and experts from the Indian Media Industry – small, big, large as well as meeting staff members along with prospective new recruits to join and grow the Sales & Marketing team meaningfully. Have also met and interacted with some very bright minds from the Indian Retail ecosystem who have been very supportive to a baby brand that we are, which is only 27 months young now.

 

After 100 days of this tenure, everything seems surreal. I was an Accidental Entrepreneur, thanks to a turn of events in the family way back in 2014. I was not prepared for running Retail Businesses or E-Commerce although Consulting was always on the cards. While all my entrepreneurial escapades went bust including a few Crores of personal savings between my wife and me, what has remained are memories and learnings. Something which I will cherish all my life and of course, am putting them to good use every day. Working for a retail company is very different than running one, for it’s easier to get paid than to pay employees. My hyperlocal ecommerce venture, which is incidentally the most utilized today during the N-Covid Crisis, where we delivered FMCG from nearby Retailers to Consumers was way ahead of time, perhaps. I received messages from a few friends over the last few days and even potential Investors who appreciated my forethought but was difficult to execute it then, due to lack of funds then.

 

Miles2Go Advisory Services, my Consulting firm worked with at least 50 Entrepreneurs on business ranging from Jewellery to Organic Bio-Manure, Agri-products to Idli-Sambar serving restaurant chains. Airports, Railways, Travel Retail Concepts were some of the areas where I worked in various consulting roles. This rich experience and exposure for over 60 months has helped me immensely as I wade my way through this complex maze of Retailing, yet again wearing a new hat (and new clothes!). I am learning every day; with a clean slate every morning – that I do not know anything about Retailing or the Retail Industry and that I get one more day to (unlearn) and learn from scratch.

I have Miles to Go. I have just begun.

Would Pricing alone entice Customers?

This is my 21^st year in Retail and I am still not amused that the Indian consumer’s love for discounted prices has never waned. Back in the late 90s when I first encountered a modern Retail outlet at Mandaveli at South Madras where my mother sent me to check out the new Store since the Sugar that was sold there was cheaper and of better quality than at the Ration Shop we would buy regularly, I was quite amazed at the whole set-up. It was a nice shop on RK Mutt Road with a bold red signage and white font which read “Subiksha” meaning prosperity in Sanskrit language. That the Indian Consumer has been price-conscious is known, but what’s interesting that almost all products in the country is today is sold at MRP – of course there are exceptions.  In categories like Electronics, the concept of Maximum Retail Price is just for Statutory Prices – to satisfy the Tax authorities. It’s been more than a decade since Electronic items were sold on MRP, barring new releases of Mobile Phones – Apple retains MRP for quite a long time since launching new product ranges while most other Brands cannot and do not retain MRP for more than 2 weeks since launch. 

In Fast Moving Consumer Goods (FMCG), MRP has always existed and will remain so, thanks to the MRP Act which governs pricing of consumer products. However, most Retailers of all sizes – S, M, L or XL or XXL (pun intended) offer or atleast promise to offer products below MRP. Subiksha’s initial success was due to a Brand promise that “Every product was priced below MRP” including Medicines which was an instant hit. The Retailer carefully priced products a rupee or more below – but at least One rupee lower than MRP which was a rarity those days. Even Kiranas wouldn’t reduce so much from the price of products, however would offer credit to consumers which was the first example of ensuring “Customer stickiness” a buzzword today. Over the years, most other Retailers have played on the Price and used it to their advantage. India’s first organized Grocery Retailer Foodworld had exciting price-offs on special days and this would draw crowds to the stores. Foodworld also launched Private Label products – “different cover, same product” which was cheaper by 10-20% across Spices, Ketchups and so on. A few years later, Food Bazaar came up with the premise of EDLP, a term coined originally by Sears in the 1960s USA which was popularised by Wal-Mart later on. 

Every Day Lower Price by Food Bazaar meant that there was no need for the consumer to worry about price change gimmicks; prices were low every day on a whole lot of items which kept / and keeps driving footfalls to the stores till date. On 26 Jan. 2006, Big Bazaar celebrated “Maha Bachhat Day” or “Big Savings Day” which was sort of similar to Black Friday and Thanksgiving weekend shopping in the West. The result was overwhelming and the Retailer has steadily increased it to 3-4 days now culminating with a weekend. In 2012, Flipkart ran “Big Billion Day” which was a runaway hit while also upset thousands of customers because they couldn’t get their hands on many products which were sold out in seconds and the delivery of products took more time than usual. Proof, that Indian consumers are extremely price-sensitive and will embrace price offers all the time. While this article is mainly focussed on Grocery, the competitive / discounted pricing works for every other product that’s sold in retail – from Agarbathis to Audi Cars, Furniture to Apartments (sans GST, as they advertise!).

I happened to visit D-Mart at Salem in Tamil Nadu, India this week. I have visited one of their outlets in Mumbai 8 years before while exploring setting up CCD within their premises. I was awed by their offering. Almost every product was on discount – below MRP to be precise. No crazy promos, no confusing promotions, buy this and get that and so on. Simple, straightforward discounts as we Consumers like it. In no time, I was carrying a basket and when I went to the Billing counter, I was informed by the girl I was to pay Rs. 901. Unbelievable that I picked so many things. But frankly, there was more to do than pricing which stuck me – the store was spic and span. For a grocery cum Hypermarket in a Tier 2 town with a population of less than 20 lakh population, that was surprising. The girl, when I asked said the store was seven months old and is filled up to the brim on the weekends with Customers shopping till late in to the night after the city is shut. Says something about us.