Relationship Retail - The Kirana Model
Relationship Retail drives the 13 million kirana stores. They contribute 11% of the GDP in India and employ 8% of its total workforce. Will technology create the next runway for this format that drives retail in Tier II Tier III cities in India?
I grew up in India with the familiar sight of the kirana store - the neighbourhood grocery retailer. The store owner would know the exact brands of spices my mother bought every month. Every month he sent a box of groceries based on what our family used to purchase. Today there are apps like Predictive Eye that predict customer behavior. The kirana store has always done that.
The Great Rebound
When the pandemic hit, everyone thought it would be end of the kirana store. The lockdown had triggered labour migration and was followed by a liquidity crunch. Then something interesting happened. When we took stock earlier in 2021 the kiranas an incredible15% growth in store revenue for the small shopkeepers. The kirana store and the customer's relationship remained unchanged. Retail is all about relationships. But there is technology too.
Hindustan Unilever's app gave more than 340,000 kiranas the ability to order through an app. There was a 42% increase in the wholesaler or distributors added. Reliance used their app to onboard another 56,000 stores through their e-commerce platform. The key driver of the model is what I would call relationship retail.
Relationship-Retail
In the food and grocery segment, in India, more than 95 per cent of the business is in the hands of traditional retailers.
The kirana store drives that deep connection with each customer and their family. They are part of every celebration of the family. The kirana store has tacit knowledge of the context in which the customer operates, that modern trade doesn't.
The kirana stores have always offer free credit and doorstep delivery. While the shops have limited space, the owners leverage the wholesaler or distributer as a warehouse for the inventory to keep costs low.
The relationship retail model can provides useful pointers for the biggest retail giants.
Will tech kill relationship retail?
The consumer-goods companies have long since realised that the kirana is more powerful than an Instagram influencer. Their recommendations can drive or kill a brand or product. Leveraging tech to improve efficiencies in storage, layout, payments etc can add value to the kirana owner.
“There is an average 50 per cent growth in employment in the stores that are modernised. Overall, the transformation of 1.4 million stores can generate 3.2 million new jobs in the market and the industry can support low-skilled jobs at mass scale.”
The new consumer in India
The biggest reason to change is the consumer behavior. People learned to buy everything online. Even two-wheelers and four-wheelers are being bought online in smaller towns. (Read more)
70% Kirana stores in urban areas and 37% Kirana stores in tier 2 cities are ready to embrace technology to scale up their business.
Read: The next billion is driven by 4Vs
As the next billion goes online for the first time, the brands will need to learn to communicate with the new consumer. Discovery, comparison, purchase and payment are all happening online.
Startups like Jumbotail have built a marketplace platform that connects thousands of kirana stores and supermarkets, with brands and staples producers. An illiterate person can differentiate between a 1kg packet and 5kg packet if it is shown visually. They cannot decipher the visual of a shopping cart.
To communicate with the new consumer, retailers need to create content that is not in English. According to Google's Year in Search 2020 report, 84% video users want non-English content. Live-streaming will not work in the rural market if the content and context is not done in the vernacular language.
“The Eighth Schedule of the Constitution consists of the following 22 languages –Assamese, Bengali, Gujarati, Hindi, Kannada, Kashmiri, Konkani, Malayalam, Manipuri, Marathi, Nepali, Oriya, Punjabi, Sanskrit, Sindhi, Tamil, Telugu, Urdu, Bodo, Santhali, Maithili and Dogri.”
The influencers who drive and shape buyer choices will look and speak very differently from those who are urban consumers.
"E-commerce and cash-and-carry retailers can leverage kirana stores for last-mile delivery in remote places and in turn support them with digital technology such as digital payment solutions at the point of sale, while intermediary players such as wholesalers and logistics providers need to modernise to fulfil the needs of the transformed retail ecosystem."
Digital commerce can benchmark a kirana store to understand how to take the mindset of service to the next level and care for the customer. That can happen only when the buyer and seller share the same ecosystem.
Bringing in diverse talent from other industries can be a powerful strategy for the retail sector. Walmart recently hired a Chief Creative Officer from Disney. It sometimes leads to solutions that have eluded those who spent their lifetime in one sector. The empty malls may lead to us asking how to make shopping a social experience.**
Authentic experiences
Teen customers are looking for authentic experiences. Bookstores are experimenting with new ideas. I heard about bookstores displaying the back cover of the book to get people intrigued about a book. Book signings, workshops, book auctions and other creative experiences are changing how people buy books. Can this be replicated in other parts of retail?
The social aspect of the relationship is coming up everywhere. We could learn from what some schools do. Children study the textbooks at home. Then they go to school to socialise with their peers. Imagine if the empty malls could be places for the community to come together and ideate. Thats the future for digital commerce.
The human touch is the differentiator. Retail is all about building relationships. The Kirana store owners have practiced that for generations.
