Wither the Kirana Store?

Figures, large ones more specifically tend to overawe. Backed up by a strong statement, (more so if from a big 5) they tend to be cast in stone and undisputable.

So we accept   the projection of turnover in retail stores in our country to grow at a healthy CARG of 17.94 % (yes…! to the second decimal place) from a turnover of 670USD Billion in 2015 to 1300 USD Billion in 2020. That is concomitant on the rural shift, increasing per capita income and overall growth in GDP.

What we find intriguing here is the finding that the good old Kirana store would continue to rule the roost, accounting for 86% of the sales in 2020. We had an opportunity recently to work on the field amongst Kirana stores in one metro city, and to speak to a few Owners. Our findings do not seem so optimistic. Here’s why

THE LOYAL CUSTOMER: From the old dependable “home delivery”, credit driven format, the Kirana has undergone a paradigm shift. No longer does it cater to the monthly needs of the neighborhood family.  The Malls and the supermarkets, the specialty stores and discount outlets increasingly account for the monthly purchases. The Kirana now caters to emergency needs, thereby limiting the contribution from the loyal customers staying nearby. The customer base now comprise of a large transit population with a year to 2 years time horizon. They do not set up a regular house, but make do with a fair amount of outside dining and minimum home infrastructure.

DENSITY: There are supposed to be 12 Million Kirana stores averaging to 1 store for every 100 population or 30 families! That’s another statistic that is big on numbers and so overwhelming, and so difficult to verify! We took a Census (research speak for accounting for every Kirana store in the area) of Kirana Stores in three growing colonies in Hyderabad. The number of stores per 1000 population is each of the three Colonies varied and was quite contrary to expectations. In an economically more prosperous area like Dilsukhnagar the number of shops per thousand of population (1.3) was more than in Khairatabad (1.0) and considerably more than the least prosperous Mehdipatnam (0.2).  Obviously Kirana owners tend to move with the economy

RETURNS: From a returns perspective there has been a steep decline over the years. The less than 750 sft.  cramped Kirana now averages a monthly turnover between Rs 2 Lakhs and 7.5 Lakhs. With margins around 15% this translates to a net income of between Rs 30,000 and Rs .1, 12,000. After rents, wages and wastage it is hard work for the amount earned. Further the lure of increasing margins with sub optimal supplies would be tempting.

THE FUTURE: The so called SEC C and the SEC D categories of families in Urban India are bound to be significant in the near future. Building loyalty amongst this class requires today’s Kirana owner to take a leaf out of his organized competitors. The Indian customer still values relationship and it is very possible for the Kirana to emerge a distinct Format in this growing space.

Author: Arvind Singh

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