Business

Retail’s digitization boom is not leaving Kirana stores behind

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Mr. Harsh Gupta, Investor – India, Flourish Ventures

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Mumbai, 29th September 2022: Flourish Ventures, a global venture capital firm, today released a new study that confirmed the importance of corner shops (locally also known as kirana) in India. The India Spotlight report is part of Flourish’s Digitizing the Corner Shop report, conducted in partnership with research firm 60 Decibels and e-commerce platform ApnaKlub. According to the report, 90% (US$540 billion out of US$600 billion) of grocery sales are conducted via kirana.

The report further iterates that about 92% of the Indian respondents intended to purchase as much or more from their local kirana store in the future. And over 80% of Indians purchased more groceries from a local kirana store during the Covid lockdown.

The global report surveyed shopkeepers and corner shop customers across India, Egypt, Brazil, and Indonesia, and developed a framework to understand the digitized corner shop opportunity. The report discovered that in all four markets, technology start-ups are providing corner shops with low-cost and online tools which can unlock a 60-100%+ increase in corner shop earnings when implemented at scale.

Within the India research, the study surveyed 200 kirana and 198 of their customers to learn first-hand about the kiranas’ business pain points, competitive threats, aspirations, and digital behaviours. The findings reveal that despite macro headwinds of inflation, pandemic disruptions, and competition from e-commerce, not only are kirana stores surviving as essential parts of local economies, they also have an opportunity to thrive by digitising key areas of business.

Commenting on the report, Mr. Harsh Gupta, Investor – India, at Flourish Ventures said, “Kiranas are not going away; they are integral to local communities and a significant part of India’s overall retail ecosystem. These small shops are uniquely positioned with their local customers, which we expect will help them hold up under competitive pressure from bigger stores. The small shops can also maintain competitiveness through digitising and automating business functions.” 

Mr. Gupta further adds, “Kirana shopkeepers have shown high adoption of digital tools and ambition to use them more to improve store operations and offerings. We see a great opportunity for digital platforms to step in and consolidate parts of a highly disaggregated market while tackling the operational pain points that kiranas face”.

With respect to the factors that drove value for kirana to its customers, location (86%), product quality and variety (51%), and longstanding relationships with store owners (42%) topped the survey. Additionally, around 33% of surveyed customers regularly use store credit to purchase items.

Despite kirana stores’ essential role in the economy, shopkeepers still face business challenges, particularly with sourcing and purchasing inventory, managing stock, and serving customers. The research found:

  • The top three biggest business challenges identified by shopkeepers include finding and keeping customers (74%), competitive prices (67%), and product variety and quality (57%).
  • The biggest pain points during operational stages included ordering, checking, and receiving of products during inventory purchases (74%), managing inventory and product placement at the store management stage (60%), and attending to customers during the selling stage (74%), which can include online channels such as messaging apps.
  • Shopkeepers are already adopting digital tools. A vast majority of surveyed shopkeepers are comfortable with digital tools and are already using apps and websites to purchase inventory and messaging apps to communicate with suppliers and/or customers. However, barriers to adoption do exist; 26% of shop owners reported difficulty in learning or adopting new tools and 16% cited monetary costs.
  • Shopkeepers are eager to adopt more digital tools as they believe these tools can bring business efficiencies. More than half (54%) of surveyed shopkeepers said they plan to increase digital tool usage for inventory sourcing and delivery from suppliers in the next 1-2 years.

Flourish partnered with Bain & Company, 60 Decibels, and digital platforms ApnaKlub, MaxAB, Mercê, and TaniHub to survey more than 800 shopkeepers and 800 of their customers across four emerging market countries—Brazil, Egypt, India and Indonesia—to understand their perspectives on digitization, competitive threats, pain points, aspirations, and opportunities for tech entrepreneurs to better serve them. The key details of the global report can be downloaded here: https://digitalcornershop.flourishventures.com/

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