Why kirana will be king in India’s growing online retail space

COVID-19 has blurred the faultlines between the retail and e-commerce industry and underlined the significance of neighbourhood kirana stores who were lured by corporate heavyweights
Representational image
Representational image

BENGALURU: India’s traditional brick and mortar stores not only proved to be crisis resilient at a time when COVID-19 hit the country but have also successfully navigated their operations to online platforms to push sales. In fact, online sales, which constituted 3% of the traditional $1 trillion retail industry in India, are now expected to increase two-fold to constitute 6% of the sector, as per RedSeer estimates.

"Online retail penetration has increased from 3% at the end of 2019 to 6% in the month of Aug '20 and 10% during the festive month. However, online retail penetration will witness a short term dip with opening up of brick & mortar stores and we expect online retail penetration to trend ~5-6% in 2021,” Saurav Chachan, engagement manager, RedSeer, told The New Indian Express.

COVID-19 has blurred the faultlines between the retail and e-commerce industry and underlined the significance of neighbourhood kirana stores who were lured by corporate heavyweights.

“Kirana stores have a 96% share of the Indian food and grocery market. Retailers are realizing the opportunity in e-commerce and adopting to online apps to champion this change. It’s a tremendous help to the industry as the existing infrastructure is utilized in fulfillment, bringing the requirement for investment and costs down, while improving speed,” said Samarth Agarwal, CEO, Max Wholesale.

Amazon announced its local shops initiative during the middle of the pandemic in August, onboarding thousands of brick and mortar stores as e-commerce sales went through the roof with people preferring digital channels over physical stores for shopping. Amazon’s boss Jeff Bezos had earlier announced a $1 billion investment in India for digitizing small and medium businesses.

Mukesh Ambani’s e-commerce venture Jio-Mart has already displaced Flipkart and Amazon in hot segments like grocery and expanded into fashion during the festive season. Jio’s partnership with Facebook-owned WhatsApp will prove to be crucial in Ambani’s e-commerce expansion plans by leveraging the strong 450 million user base of the messaging service platform. WhatsApp has also finally received the nod from NPCI to start its payment service in a graded manner, which will help small retailers reach a wider base of consumers by placing and paying for orders online.

The third biggest rival is Walmart-owned Flipkart which onboarded 70,000 small stores this year flush with a $1.2 billion investment. The e-commerce company said that there was a 30% spike in sellers this year, mostly small and medium businesses from tier-II and III towns.

Flipkart’s Senior Vice President Amitesh Jha said as one of the oldest retail formats in India, kiranas have a high penetration and showcase effective management of supply chain drivers such as facilities, inventory, information and sourcing, as well as maintaining a long-standing relationship with consumers.

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The New Indian Express
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