CHENNAI: They provide your daily dose of milk and vegetables, your monthly supply of provisions, some even stock stationery and drinking water. They are ubiquitous and indispensable. The local kirana shop or ‘maligai’ kadai is the fulcrum around which the local economy revolves. And yet, we hardly spare a thought for them.
But that sweating, bare-chested man handing you your groceries probably knows as much about inventory management, debt ratios, maximising margins and customer relationships as any IIM graduate. Probably more. And successful more often than not.
“I earn nearly Rs 4,000 a day,” says Vijay Kumar, a shop owner in Nerkundram, mopping the sweat off his brow as his wife looks on. “Business has been difficult, the profit margins we get are measly, but hard work is keeping us alive in the competition,” he says.
Selling one biscuit fetches him 8 paisa, 1kg of rice – Rs 2. For cool drinks, he makes Rs 15 from Rs 100 worth of sales. The margins for cigarettes, for those who stock them, are Rs 10 for a pack that costs Rs 120. Vegetables, surprisingly, are high margin items. But when margins are meagre, you increase volumes and attract customers. How do you do that, when there are five other shops just a few minutes away?
Kumar does it by never differentiating between his customers — be it a rag picker or a man from the upper middle class. He extends credit. “There have been times when my customers don’t have money to pay for the goods they buy. I ask them to pay it next time. This builds personal relationships,” says Kumar. He loses some money, but gains loyalty.
S Thiagarajan, of Valasaravakkam, who has been running a shop for over a decade, divulges another gem. “Stock everything. End up saying no to a customer and there’s a chance they might not come back.”
The trick is to stock the right things at the right time. Modern retail giants do it with data analytics. Thiagarajan and his ilk do it with a bound account book, a pencil and a calculator…and yes, instinct. On a typical day, he sells about Rs 15,000 worth of stock and earns a profit Rs Rs 700 or Rs 800.
But when you make a mistake, or when disaster strikes, like during the Chennai floods last year, you lose big. And you need to borrow to start again.
Thiagarajan lost Rs 2 lakh worth of goods in two days in December. “I borrowed about Rs 1.5 lakh to start again. But it’s tricky. If the lender doesn’t understand, you might even end up closing shop,” he points out. Most kirana shops deal with debt during their initial years. The capital needed to open up a decent sized shop is Rs 5 to 7 lakh currently.
“Many shut down when they cannot manage debt,” says N Ramakrishnan, who runs a large grocery store in Vadapalani. He started out with Rs 12,000 and a small ‘potti kadai’ in 1991. “All the skills are irrelevant if you cannot manage your debt. I nearly shut down several times in the last two decades. But I scraped through. Many don’t,” he adds.
However, pressure from organised retail chains is driving more and more small time shops like these to lenders. Organised retail shops are able to sell products at cheaper rates, at lower margins and many of them dole out offers. “We can’t afford that,” says Kumar. “We have been surviving the onslaught of chain provision stores or shopping malls. At times, I want to close down. But then we don’t have any other option,” he adds.
Kirana shops have distinct advantages. They’re hyper local. And in times of difficulties, like the floods, they’re fallback options for even the wealthy.
Shops like these, with their pencil toting, sweating ‘annachis’ were vital lifelines for Chennaiites, supplying food items and water.
$1.3 tn By 2020
The current estimated value of the Indian retail sector is about $500 bn and is pegged to reach $1.3 tn by 2020. But no one has a clear figure about the unorganised retail shops like that of Kumar’s which cater to the majority
Potti Kadai sells...
Biscuits
Cost Rs 10
Profit Rs .8
Rice
Cost Rs 40
Profit Rs 2
Sugar
Cost Rs 48
Profit Rs 3
Egg
Cost Rs 4.50
Profit Rs .5
Tomato
Cost Rs 25
Profit Rs 5