India is a unique country that has ability of surprising foreigner on pretty much every step. Indian retail sector is noticeably different compared to the one in Europe. While living in India, I was pleasantly surprised of how efficient kirana stores really are. Although usually not impressive in size, they carry surpassingly large variety of merchandise. What’s more important, everything is available for almost instant home delivery. Ordering works especially well after some time, once the store owner gets to know your taste and preferences. Even phone ordering is not as inefficient as one would expect in the age of the Internet.
India notoriously has a very low percentage of (estimated 7 % of the total) organized retail penetration. It is low even compared to other developing countries and incomparable to Europe’s 85 % level. Given the statistics no wonder that Indian retail sector is seen as a great business opportunity. However, despite the efforts from local and foreign giants alike, for multiple reasons kirana store remains dominant format in the market.
Kirana store model is working so well in India because of several fundamental reasons. First, they provide goods on credit. It is extremely valuable service in a country where expenditures on food account for close to a quarter of all spending (in case of the poor – more than half) and banking services are not commonplace. Second, female employment is still relatively low, that allows spending more time for frequent shopping. Third factor is convenience. Kirana stores are usually small and located within a waking distance. And last but not the least, they offer truly personalized customer service.
Kirana stores are dominating due to a set of conditions that are peculiar to India. Despite the perceived conditionality of success, this retail concept has a lot what it takes to be appealing in foreign countries, as well.
If we look at the situation in the Eastern Europe [1], the seemingly unstoppable spread of supermarkets took place partly due to the lack of competition from retailers that are able of delivering such personalized shopping experiences. Small stores were operating basically as smaller versions of supermarkets, and thus, after more convenient modern supermarkets began to emerge, customers had no reasons to keep on shopping in their neighborhood stores.
The potential of India’s domestic retail market is a widely debated subject. On the other hand, a reverse action of Indian retailers expanding abroad is not spoken much. The retail model of kirana store, if developed into a functional franchise, might have a disruptive power.
I’m aware of the shortcomings of this model and that some of its strengths are relevant only within India. However, even if some aspects are not workable, kirana store offers an overall solid concept based a) on a low rent (due to small floor area required), b) personalized service, c) fast home delivery and d) customer credit (maybe it could be delivered in collaboration with micro-credit companies nowadays working so extensively in East Europe). The fact, that stores are unorganized and family owned, is not an unsolvable obstacle either. There are many examples of successful retail cooperatives (co-owned by members) expanding internationally.
It is difficult to imagine Europeans changing their habits totally and stopping visiting supermarkets altogether. But if we look at daily grocery shopping, the demand for a more convenient and time efficient shopping experiences is already obvious. Kirana store could be one more great Indian innovation to surprise the world.
Would love to hear your thoughts on this…
[1. Eastern Europe is a $ 1,7 trillion economy, comparable in size to India’s $1,8 trillion economy.]
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Author: Mantas Balcius is an entrepreneur and business development consultant in Lithuania, Turkey and India. He’s a creator of www.indialithuniabusiness.com. Twitter @mantasbalcius