The coronavirus pandemic brought to fore the relevance of neighbourhood kirana stores as consumers took to these stores to fulfil their needs for staples and essentials. However, at least 90,000 small kirana stores could shut down by 2022 as new modern stores open, a report by IT firm Accenture and the Trust For Retailers and Retail Associates of India (TRRAIN) says.

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The report notes that the transformation and modernization of just about 10 percent (1.4 million) of India’s 13 million traditional grocery stores could boost consumption by up to 20 percent and generate 3.2 million new jobs in the market.

The transformation that the report is referring to is right from improving layout, product placement in stores, to equipping these kirana stores with technology to manage operations. The report notes that most of these stores accepted payments through Paytm or other digital wallets during the lockdown, which showed their willingness to upgrade to modern digital practices. The report bets that transformation of 10 percent of kirana stores could also expand the formal economy by approximately 250 percent with computerized billing and ledger systems.

The modernization that the report talks about has also been an emerging trend in India over the past year. Consumer and retail companies such as Hindustan Unilever, Walmart India and Metro, along with startups such as Kirana King, ShopX and PhonePe are recognizing the potential in digitizing kirana stores and have been creating several engagement models to work with Kirana stores to modernize them, providing them tech solutions for customer-facing and backend operations or meeting their working capital needs.

The report says, “There is a distinct need for Kirana stores to transform their operations and their shops, not only to survive the competition but also to tap into the consumer’s need for modern stores and new ways of buying. Additionally, the transformation will help the stores withstand the ongoing structural changes in the retail sector. Already the presence of modern retailers in major cities is causing many stores in nearby areas to either close down or lose their majority customer base.”

The advantage with kirana stores is their penetration into the smallest of cities and towns, which helps them serve neighbourhoods that modern retail stores or large supermarket chains may not be able to access. A testament to this is also Reliance Retail looking to rope in kirana stores to deliver grocery directly to consumers for its latest e-grocery site JioMart. A pilot that is reportedly set to be launched later this year will see JioMart signing up over 50,000 kirana stores across the country to directly deliver food and grocery items to households.

The Accenture-TRRAIN report has found that every kirana store that modernized reaped significant gains in turnover and profits, and achieved better inventory management. The revenue growth ranged between 20 percent to 300 percent with an average of 135 percent, while the profits grew 30 percent to 400 percent, depending on the level of transformation undertaken.

One store owner in a suburb of Mumbai was able to improve his sales by 10 percent solely by being able to manage his inventories better in his tiny 400 sq. ft. store.

Kirana stores registering higher sales also, in turn, helps FMCG majors such as HUL, ITC, Britannia, Dabur, among others in improving sales.

The report also found that after modernization, with the use of inventory management systems, these stores were able to sell more SKUs (roughly 3000 to 7000 as against 500 to 2000 earlier). Orders of all SKUs began to be placed on sales generated, which resulted in better management of inventory.

(Edited by : Aditi Gautam)