Kiranonomics !

Across the world, the economy has come to a standstill. Few exceptions might exist however, indicators like declining oil prices (negative futures), decline in shipping, and restrictions on sale of non-essential goods remain in place in most parts of the world.  India too is no exception. India was one of the frontline markets for e-commerce and supermarkets. In India over the last couple of decades, there was a movement from the unorganized kirana retail outlets to an organized retail outlets comprising of super markets, hyper markets, malls among other things. In the emergent context, these super or hyper markets too were facing challenges from the rise of the online e-commerce giants including Amazon, Flipkart (acquired by Walmart) among others.

The spread of the organized retail both offline and e-commerce did not confine merely to the few upper income groups and demographics in urban areas but pervaded deep into the semi-urban and rural clusters as also the urban low income groups. Faced with the lack of assortment in the offline unorganized localised retail, these offered depth and breadth in assortment while the economies of scale allowed the prices to fall. This coupled with the cash on delivery payment mechanism enabled these players to develop deep roots. In the process, the humble kirana store started to lose its shine and seemed to be on the way to ruin.

As the debate emerged on the feasibility of Foreign Direct Investment (FDI) in retail, the kirana owners along with the wholesalers were at the forefront against the possible move. Given their political lobby, they were able to postpone the decision for quite a few years. Kirana shops were deemed as somebody standing in the way of modernization of Indian retail. They were the handiwork of the evil bania who would not countenance a challenge to their situational or positional monopoly thus depriving the society of societal economic surplus.

Yet, today, as the pandemic originating in Wuhan is shutting down the societies, the e-commerce vehicle seems to be suffering. While it is desirable the e-commerce would be the best vehicle for delivery of goods to doorsteps of households in the time of social distancing, they are riddled with numerous difficulties. The difficulties range from span of service, availability of labour for delivery of goods non-availability of goods, lack of co-operation by authorities in implementing smooth operation by e-commerce operators are resulting in numerous difficulties.

To add, there is little movement allowed across the city. Many cities and towns have banned two wheelers and four wheelers. This has imposed a limitation in terms of mobility. Many supermarkets would be at some distance away from home. It might not feasible to walk down, purchase goods even if open and carry them back home. The difficulties cited above have resulted many retailers not willing to deliver goods at home. It is in this backdrop, the humble kirana store is making a comeback.

The kirana store is perhaps the best localised market and caters to the needs of the local populace. The kirana owner knows the local customer base well and their tastes and preferences. Though they too suffer from lack of availability of goods and inability to maintain high levels of inventory, they offer an experience that matches the local expectations. They are sort of store of last resort in case of emergencies. Given their location, they can keep the store open or even deliver to households nearby. Some of them operate from home giving advantage of having stores open and not dependent on external labour. While it might lead to disguised unemployment, the locational and geographic advantages are often too missed in such a context of emergency requirements. Even in normal times, the emergency needs are met by the local kirana store.

Thus the pandemic has created an opportunity to provide a fresh lease of life for the kirana store and the neighbourhood bania. The kirana store without doubt suffers from disadvantages. There are diseconomies of scale thanks to its inability to leverage the scale, they have assortment issues given the small layout they operate, are prone to diminishing returns, have limitations in working capital, credit access, lack of access to formal sector, outside the tax purview among many other things. Yet they command critical assets that are difficult to be replicated by the organized offline and online retail. They have the knowledge of the local tastes and preferences, they have cultivated the relationship with the local society, they have developed equations with the local authorities, they have managed a link to the supply chain albeit not so cost effective, function as a node of local distribution, serve as single point of information about goods available in the market besides many other dimensions. These are core assets to them and can be leveraged effectively. To many, once they are habituated to a retail outlet, given the category management and the subsequent stickiness, it is difficult to shift loyalties elsewhere. This is where kirana stores come into handy.

While they are no doubt indispensable in the current times of distress, there is an opportunity for them to embrace technology and take their survival to a new level altogether. There is no doubt that people given a choice would want to order at the time of their choice and want delivery of goods at home steps at the time of their choice. Further, they desire low prices comparable to online retailers. In the context, it would be unsurprising to find emergence of a ‘Swiggy’ or a ‘Zomato’ for groceries. There would perhaps emerge an app that would connect the prospective customers to various grocery shops. The consumers would have a choice of picking up from their preferred shops while being given a service equivalent to the e-commerce giants. The wholesale system and structure might not remain the same given its core activities under threat. But the modern versions of third party inventory management firms might rise. These would hold the inventory for the grocers. The grocers if they were not able store goods at their place but can dip into these inventories from these third party firms thus negating the disadvantages of lack of scale.

The kirana stores manifest in some ways the anti-fragile firms of retail and distribution in contrast to the large centralized e-commerce and offline organized retail giants who are susceptible to slightest disruptions. The localised anti-fragile forms in order to remain immune from disruptions and hold forte in the land of large giants need to embrace technology in full flow. The new retail landscape will not merely be of the e-commerce and brick and mortar organized retail giants as perceived not too long ago. They would be of the new e-version of the kirana stores that would challenge conventional definition of retail.