Grocery Platforms: Phygital or digital?

June 13, 2021June 13, 2021 Icfai BytesIcfai Bytes 0 Comments

Can Mom and Pop Kirana stores coexist and co-work with E-commerce marketplace giants like Amazon, Flipkart, Reliance (Jiomart) or Tata Digital?

Source: Freepik

For Mrs. Desai, who lives in Ahmedabad, Vraj parlour – a kirana store in her neighbourhood was her saviour and the most trusted store. She could get all daily use items from there. Even during Covid-19 lockdown in March 2020, the store did not ditch Mrs. Desai, though the wait time increased owing to long queues. As the fear rose with the second wave, she switched to digital mode and ordered her favourite stuff from the store through Swiggy Genie this time, for a delivery charge of Rs.25, as Vraj parlour would only deliver free for a minimum order size of Rs.500. She would order milk, fruits and vegetables from BBdaily (an app from Big Basket, now part of Tata Digital) and household care items from Flipkart. The story of Mrs. Desai is similar to many of us going ‘phygital’ and using omni channel for our need for essentials.

Covid-19 pandemic has upended the retail segment in India. According to Technopak advisors, by 2030, India’s retail market is projected to grow by $1.5tn1 .  However, e- commerce is facing teething issues due to uncertain times. Still, grocery segment is one of the fastest growing segments of e-commerce in India. It has opened up choices for consumers like never before.

E-commerce Marketplaces giants like Amazon, Grofers, Flipkart, Jio-mart and Tata Digital have the power of AI enabled technology and can offer deep discounts and huge variety and are therefore, giving tough challenge to brick and mortar stores. However, with  more than around 13 million kirana stores, accounting for 88 percent1 of the physical stores, the power of humble kirana store is unimaginable in terms of reach and accessibility. Not to forget their expertise in customer intimacy, simple business set-up, capability of servicing small orders and local market knowledge. 

Challenges

For e-commerce giants, it has been a bumpy ride. Back in 2013 when e-commerce giant- Amazon entered in India, brick and mortar stores feared their untimely death and there was a growing resistance in the retail segment against foreign e-retailers. Confederation of All India Traders (CAIT) raised issues of inventory led models and deep discounting and strongly showed their dissent against Amazon and others for flouting foreign direct investment (FDI) rules2. As per FDI rules (Press Note-2 of 2018), foreign e-commerce companies can only work as platforms and not manufacturer-sellers. Further amendment in the rules suggested that an e-commerce player cannot be biased to any seller on their platform and cannot use that information as “market advantage against that seller”3.

CAIT with Department for Promotion of Industry and Internal Trade (DPIIT)has built a swadeshi e- commerce marketplace– Bharat-e- market, with traders across India building a substantial pressure on giants.  Coupled with all these issues, e-commerce giants have been facing issues of warehousing costs, employees cost and competition from other big players.

Kirana stores are technology challenged and don’t have deep pockets. Insufficient manpower and providing safe shopping for customers during pandemic are some of the challenges faced by them.

Benefits: Transformation

Things have taken quite a turn now. According to SnapBizz, around 1 million4 kirana stores have gone digital and others are trying to be part of this ecosystem. Digital payment gateways made this process smoother.

On the other hand, e-commerce giants are stepping forward to shake hands with kirana stores. Amazon, Flipkart and Jiomart are trying to reap the power of local kirana store by partnering and bringing them into the supply chain. Bringing kirana stores onboard will let the biggies reach hyper local and allow them to penetrate deeper in the market. Amazon has tied up with 50,000 offline stores under its ‘local shop program’ (as per Amazon’s local shop website).  Similarly, Flipkart and Jiomart are going big on collaborating with kirana stores. It will help kirana stores to leverage their power as well. With last mile delivery business flourishing in India, start-ups like Zypp electric and others like Swiggy Genie etc. can help offloading the delivery load from local stores.

Conclusion: Partnership riding the wave of distribution

As per Redseer, the leading management consulting firm, e-grocery segment was meagre  0.3% in 2019, but will reach to the size of $24 billion,  piercing 3 per cent of the total grocery market by 20255. Creating and partnering this hyper local circle is what biggies are aiming for and they cannot achieve this without the help of kirana stores. According to Flipkart,  with this partnership, average monthly delivery income  for kirana stores grew by 30% and the most in the South6. Kirana stores can enable faster delivery and solve India specific logistics challenges in delivery of perishable items like ice cream etc. Wooing customers with kirana stores in their arms will make the proposal look dreamy .Onboarding of kirana stores however, is still at nascent stage and only time will tell how this partnership will go ahead in future. From ‘fear’ to ‘trust ‘and ‘physical’ to ‘phygital’ or rather digital has been a long journey and seems to be the only way ahead.

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Discussion Question

  • From your own experience list our three advantages and disadvantages of kirana stores over e-commerce platforms.
  • Do you think the partnership of kirana stores and e-commerce giants, creating an ecosystem together will work in future and is sustainable?

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