What's rotten in the Kirana?

The last two emergency grocery purchases we made, saw us at what is called the Kirana store, in India. These purchases were made at two different Kirana stores. What was common about our purchases was the fact that, on returning home and inspecting the wares, we found a few not so fresh, close to rotten, vegetables that had been slipped in with the rest. This happened because we didn't pick the vegetables ourselves. And that's because these stores don't have enough of space for you to get in and pick your own stuff.

Now the romanticised Kirana stores around India have been heralded as the last bastion that's standing tall against the might of organised retail formats. And the reason given for their survival is the personal relationship that the store owners have with their customers, their extending credit and the delivery of stuff home.

Tell you what, that's a whole lot of hogwash. Kirana stores survive for one reason, and one reason only. Their convenience in terms of proximity. The larger share of the Kirana store customer comes from the lower and lower middle class in India. This class finds the Kirana store most convenient because its just next door. Going to an organised format store would require transportation. Plus the the organised store facade is such that it drives perceptions of higher prices. Both of these are good enough reasons for the lower middle class to stay put with the Kirana store. The upper classes in India prefer organised formats and resort to services of a Kirana store only if its an unplanned, emergency purchase.

Many a times, the result of that is part rotten. Are Kirana stores on their way out? Not yet. But they'll down their shutters if organised retailers can solve the proximity problem. Can the organised players be able to do that? Sure, but only if they tweak their format and their mode of operation. They have to down store sizes and maybe even take the franchise route.

Comments

nikhil said…
root cause of the problem is supply chain.
kirana store buy's items less frequently to reduce cost of transportation.
while big chains buy items more frequently because they have advantage of EOS(economies of scale) as they keep more no. of items and they have cold storges facility also.

so if you need fresh items from kirana store you have to pay more i.e his extra cost of transportation.
nikhil said…
if big organised retailer's will go for small size or franchise model than transportation cost will definitely increase to keep every thing fresh in store.

kirana store's will not able to target lower middle class if they keep everything fresh for consumers like you.

so i think they are on right path.
nikhil said…
moreover in case of franchise or small size shop the rental + maintain ace cost will be added to the product.
Tiger said…
Hi Sir,

Visiting your blog after a long time. How have you been?

One of the reasons you mentioned for kirana stores survive is that they offer credit. This is the primary reason. Comparatively these stores might even charge a higher price than what you might end up getting in a regular organized store (considering they do not enjoy discounts from handling bulk). But for the middle and lower class still are loyal to them. So what if some close-to-rotten vegetables make their way into their kitchen as long as there is a kitchen. Here is someone they can depend on to keep food on the table and do not demand a credit card for a small credit. That's a trade off they chose to live with.
Prof.Ray Titus said…
Nikhil,

Supply side efficiencies are critical, but isn't the only contributor.

Note Paromita Goswami ('Would Kiranas in Urban India Survive the Modern Trade Onslaught?
Insight from Efficiency Perspective');

'As pointed out by Sanghavi (2007), so far retailers, who
focused on developing only supply-side efficiencies in terms of
reaching retail productivity targets, need to think about demandside efficiencies in terms of satisfaction of customers’ needs in order to optimize business performance. It is important to identify efficient levels of the various dimensions of satisfaction of customers’ needs that directly link to measures of specific firm outputs that firms intend to maximize in addition to supply side inefficiencies'.

Vamshi,

There are inherent contradictions in what you say; 'as long as there is a kitchen' points to strained finances. Contrast that with higher prices. Plus the 'rotten' part. Its acceptable because there's credit extended?

Misery driven choices aren't sweet. Neither are they any reflection of loyalty. Its what people resign to. Its like the romanticised notion of 'Mumbai's spirit' post the dastardly terrorist attack. Did Mumbaikars have another choice than to get back to work. Fear can wait, Life beckons.

Also, the kiranas that will suruvive are ones that will adapt. (Quote);

'We found 1 out of 3 supermarkets (0.33), 1 out of 2 upgraded
kiranas (0.5), and 1 out of 5 kiranas (0.2) to be efficient. Upgraded Kiranas, in terms of probability suggested by this study, has maximum chances of survival (this may be attributed to modern trade-like ambience as well as greater customer insight); followed by supermarkets and lastly Kiranas. The results suggest kiranas would do best to try and upgrade in order to survive. Given that modern trade outlets have deeper pockets and can afford to make mistakes and get away with it in the short term, kiranas have to stay alert, try to upgrade and continue to serve customers well, while concentrating on innovating, evolving and remaining efficient on retailer productivity scores.'

http://www.acrwebsite.org/volumes/ap08/ap_2009_vol8_154.pdf

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