KAASH: Kirana as a service hopefuls*

Strategies envisioned and prospects scoped; Time to unwrap each one of them.

Oct 01, 2020

Welcome to our Original series at the duologue. The reading time to finish this one is around 12 mins.

Kirana is the star of commerce for the post pandemic India. A distributed network of small stores supplied the entire On-Demand Delivery fleet with essential groceries that customers ordered. Much love was adored to these network of stores that were supposedly looking at their demise in the hands of online platforms just a few years ago.

Karthik has a twitter thread with few snippets of coverage in the media:

Karthik @beastoftraal

Big Basket is still throwing 'no available slots' message. More than e-commerce, what is really helping is neighbourhood shops! A small vegetable vendor near our place delivered vegetables after we ordered via phone! 20-30% expensive than usual, but that's understandable.

Being termed as the saviour in the pandemic. Every on demand delivery and e-commerce company has turned its focus on these Kirana stores. In a previous story I wrote about the Kirana strategy:

It would be interesting to see the narrative wars that will ensue in the future where every e-commerce store, on-demand service and B2B commerce company will want to partner with Kirana stores.

Time has come to revisit the topic and examine the strategy at play. As we are moving into the territory where running a Kirana store is being turned into a service. First, it begs to ask the question, why?

Kirana’s Prominence

Everyone’s darling is a generic Kirana store that epitomises the state of Indian business. Small, self-sufficient with a captive market (neighbourhood surrounding the store). This is certainly not true for the entire 12 Million stores but you and I will just get on with the reporting that is currently frenzied. It is overtly optimistic about this space.

Before we get into the weeds of how each company is stacked up, it is best to address the prominent trend in play. The focus on the Kirana stores is not new, but the narrative around them is certainly new.

Let me explain, the efforts to digitise these stores was prevalent from the heady days of e-commerce in India. Yet, the opportunity was never valuable for startups and ecosystem funding these startups back then. This changed when the richest man in India decided to focus on them as a strategic ploy against the well established e-commerce firms.

All of a sudden we are in the realms where without the Kirana stores as partners, growth of online commerce is not feasible. To visualise this better we will take the help of Indian Postal service (IPS).

Analogy : Postal Service

There is no doubt that IPS covers all corners of India.

With 1,55,531 Post Offices, the DoP has the most widely distributed postal network in the world.

Now, if you are a parcel delivery company looking to operate in India. You would love the opportunity to use the entire network of IPS to reach your customer. You could tap the wide distribution of IPS’s network to reach your customer better while someone else does the actual job of getting it to your customer.

In a similar fashion, online commerce firms have realised that they are better off functioning with the Kirana stores spread across India, all 12 Million of them rather than disrupting them. These stores would function as their distribution network to serve their own customers better.

The problem arises when each store is fragmented, family owned and established in its core. To top it off, each one is run by its owner in a different way. The analogy holds true in terms of representation but falters while accommodating the person running a Kirana. When compared to an official working in a branch of IPS, Kirana owners are farthest from being homogenous.

Distribution is the Play

Things become even more complex as different companies see these Kiranas as a distribution channel to reach their end customers.

First, we have the e-commerce looking to use these Kirana stores as part of their delivery facilities to serve their customers faster.

Similarly, we have EV companies looking at these stores as a distribution solution to serve their customers charging needs.

Lastly, we have payment and book-keeping companies looking to digitise these stores in order to create better data so that the payment companies’s customer, Lending firms can lend to these Kirana stores for their working capital.

With such diverse focus, it never has been a better time to be a Kirana Store owner. Sooner or later, one of them will launch a model to buy the owner out as well. In the end, a Kirana store is just the means to their respective ends for each of these companies.

To understand all the efforts across companies we need some sort of framework. I pick Enablers vs Growers framework to help us understand the alignment with the Kirana.

Enablers form the set of functionalities that help the process and functioning of a Kirana in a more efficient way.
Growers form the other set of functionalities that help the Kiranas increase their business by either increasing volumes, expanding SKUs or by serving newer customers.

Enablers

A Kirana owner does multiple things on a given day. To enable his/her functioning we have apps from payment processing companies that offer their PoS ( Point of Sale) along with their Inventory management system to help with sales and transactions. Phone pe, Paytm and Jio Pay fall into this category.

Another set of apps that fall in this segment are the digital bookkeeping apps that help a shopkeeper keep records of all the transactions of credit to his/her customers. An example of this would be okcredit’s model of digitising the transaction book to provide loans to Kirana Stores.

On the procurement side of it, we have the likes of Jumbotail, Reliance Marketplace and Flipkart wholesale(fashion only) that provide stores “better ways” to order stocks. It could be better terms of payment, loan on stocks, wider assortment of stocks or it could be quicker delivery of stocks.

A contrast to all these startups is Kirana linker by a company called Gloabl Linker which helps Kirana stores populate their catalogue online and collect orders through digital means from customers. It is an initiative that is spearheaded by CAIT(Confederation of All India Traders)

In the enabler, category companies are aligned to make the job of the Kirana store more efficient, optimised and hassle free but the end objective of serving customers is left to the owners.

Growers

Growers form a cohort that are looking to expand the work role of a Kirana Store owner. He/she is no more just a store owner, they are part of a delivery network functioning as a dark store. Like in the case of Flipkart quick, Amazon Space and Jio mart.

Kirana stores are also acting as the suppliers for on-demand delivery fleet companies to power their latest play of hyperlocal grocery deliveries. We have Dunzo, Swiggy, Grofers and until recently Zomato as well.

Next, we have Phone Pe making every Kirana store function as an ATM. Such sort of endeavours try to diversify the cashflows but they also bring in new process flows that the owner of the Kirana needs to adapt.

If we place each of these initiatives in circles coinciding with their role to the Kirana Store. They end up looking like this:

There is a third circle that is denoted with a "?" . This one is not talked about much in the popular narrative but to me it holds the key to the strategy. Before we get to it, time for a story.

A tale of two Kiranas

In the neighbourhood I currently reside, we have two Kirana stores. Each one of them represents the generic mindset and circumstances of the Kirana store owners.

The first store is run by an elderly couple who take turns at the register throughout the day. They have their house behind the store itself. Their children are settled in the USA. When you get talking with them, you realise why they continue to run the store, no other vocation- they have been doing this for a long time now and would like to continues as long as they can(physically). The store closes for lunch, closes down relatively early at night and staffed with 3 helpers. The owners have a log book for customers and undertake deliveries as well within the vicinity. They have been at this for more than 25 Years.

The second store is run by a family comprising of an elderly couple of similar age bracket as in our previous store but with their son, who is his late 20’s. All remaining attributes are similar to the first store.

The difference between the two stores is that the first store is not using any of these services(mentioned above) and relies on their existing network of distributors and vendors. It serves its customers through phone calls and manages their credit ledger through a normal registry.

Whereas the second store has dunzo delivery “superheroes” fly in and out throughout the day. They are listed on Swiggy Grocery. They use few of services on the enablers side which we covered. The second store runs late in to the night, functioning as a supplier to all grocery needs in and around the locality. There are more vehicles unloading supplies into the store compared to the first store.

Mindset: Achilles Heel

The major difference between the two stores is in the mindset. This to me forms the bedrock of the success of Kirana stores working as the next frontier for all the companies looking to use it as a distribution. The mindset differences outlined over here are representative, not in entirety, of the Kirana owners fraternity. Some function to serve their existing base(Sustenance) and some would want to grow(Growth Mindset). I have no clear answer to how many fall into each bracket. (If you have any source on the numbers, do share with us.)

Not mentioning the mindset shift required from the Kirana Store owners to deploy extra workforce to accommodate each of these business models is a disservice to the overtly optimistic take on Kirana strategy. Especially at a time when finding workforce has become a major bottleneck. A small Kirana shop owner thinks about workforce very differently compared to a startup recruiting to blitz scale.

In the end, I would like to leave you with a proposition to ponder upon. Each of these businesses is looking to Kirana stores as an outsourcing agent for their own distribution or growth. While some businesses are aligned with Kirana store and some are just facilitating. Yet, all are looking to reduce their overheads and increase that of Kirana stores. This situation has clear parallels to the IT outsourcing industry we use to house in India (still house). Going by the success of the IT industry(stint), how likely do you think we should consider this play coming to its fruition. I for one would like to see an alignment along mindsets before we decide any further.

Regards,

Vivek

Duologue

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