THE RISING OF KIRANA STORES

THE RISING OF KIRANA STORES

Snehamoy Mukherjee, Associate VP , Analytics, Technopak

Even before the controversy surrounding the relaxation of FDI norms in retail exploded in India and obituaries for local kirana (mom and pop) shop owners were being written and bandied about, a quiet revolution has been taking place in the backyards of the Indian retail industry. The reason I call it quiet is because it has been slow, silent and systematic, without the usual fanfare and brouhaha that accompanies any disruptive business ideas that begin to take shape nowadays. And the reason I call it a revolution is because it is surely changing the way Indian consumers are beginning to shop from their neighbourhood kirana stores. But even more importantly is the fact that kirana shop owners are again, re-inventing themselves to provide Indian consumers with the best of service and convenience. The company that is facilitating this fight-back and arming them against both modern retail and future multinational retailers is Aaramshop. Aaramshop is a New Delhi-based startup, which is creating a digital storefront for kirana stores, empowering them to reach out to their existing customers with the additional facility of being able to shop online or through smart phones. It was founded in April 2011 by Vijay Singh, who had earlier started a below-the-line marketing services firm called Sercon and sold it to WPP.

With 1600 Aaramshops in 24 cities and an ever increasing number of kirana stores joining the ‘Aaram’ fold, this has the makings of a great disruptive social change that is bound to sweep the Indian retail landscape. The reason why Aaramshop will bring about a revolution is because it is based on a very noble social cause: to provide kirana stores with a strong, modern, customer-facing technology arm to supplement their personalised service and take on the might of the modern retail outlets with their unending queues, non-functional barcodes, irrelevant and one-size-fits-all promotions, non-personalised shopping experience, car parking problems etc. While at present, Aaramshop provides an online technology platform to these stores under one umbrella, it will also have a long term impact of bringing the best practices of modern retailing to the kirana stores including inventory planning, POS (point of sale) software, bar-coding etc. Though malls and hypermarkets promise a relaxing and enjoyable shopping experience, a lot of Indians are slowly realizing the merits of spending that time doing something more worthwhile.

Revenue model
Another important aspect to note is that AaramShop is a free-to-use service for both the consumers and partner retailers; therefore there is no escalation of cost of essentials when you use AaramShop. For now, Aaramshop generates revenue by charging brands/FMCG (fast moving consumer goods) companies for promoting their wares online to their end consumer. It doesn’t charge the retailer per transaction as Aaramshop doesn’t contribute to a significant portion of the stores’ revenue. But in the long run when the adoption of online shopping for grocery picks steam, it might very well become a major source of revenue. The reason why online grocery shopping hasn’t been very successful as yet is that the margins in grocery are much less (often single digit) as compared to books and apparels. Also, there are additional problems of storage of perishables and temperature sensitive items. Hence, a hybrid retail mode is an excellent solution where the kirana stores serve like customised warehouses for Aaramshop, with the added advantage of having physical storefronts.

In terms of revenue, Aaramshop can look at a bigger play in the field of generating and selling consumer insights to brands and FMCG companies, once it hits a steady strength of repeat customers. At present, FMCG firms and brands have data on products and how they move till it is sold, but they lack data on end consumers who buy their products. To make up for it, frequent and expensive surveys are commissioned to capture that data. Hence, once Aaramshop is able to spread out rapidly and have a sufficiently large customer base, it will provide a serious challenge to survey-based insights on consumers by providing real behavioural data on consumers. Additionally, the volume of data captured by Aaramshop will far undermine those captured through surveys.
Another big additional source of revenue for Aaramshop would be data-based marketing. Using the Aaramshop data, brands will be able to target their end consumers directly with offers and promotions, building sustained brand loyalty. This will encourage brand owners to move significant portions of their advertising and marketing budgets away from traditional media to targeted and personalised messaging through Aaramshop. This could, potentially, be a rich source of revenue for Aaramshop.

Interesting trends
There are some interesting trends which come to the fore on the state of online shopping in India if we look at the Aaramshop consumers – the males seem to be more inclined to shop for groceries online than women, who constitute only 37 per cent of the buyers. Another interesting demographic that is taking shape is the fact that while female shoppers form a lower percentage of the overall buyers when it comes to online grocery, they are by far the larger spenders – both in terms of the basket size as well as the basket value. While men seem to be buying a lot of snacks online, women seem to be stocking up soaps and detergents, apart from other household items.

It is noteworthy that women between 36 to 45 years of age come up as the largest buyer segment, while for males it is 22 to 45 years. This negates the widely held hypothesis that online shopping is a youth only activity. Online grocery shopping is serious business and is being increasingly taken up by working professionals and even mature households.

Most of the shopping happens after 12:00 hours and the top categories that were purchased during this period were: 1. Staples – rice, wheat, lentils and pulses 2.Edible oils 3. Coffee, tea and cocoa 4. Laundry supplies 5. Milk and dairy products. It is also interesting to note that most late evening orders are for next day-delivery. (Produced with permission from SOGC report of Aaramshop). The difference between ordering directly from a store through a phone call and ordering online is mostly that of convenience and flexibility. I am personally fascinated by the idea that I could order groceries while travelling in my car back from office or just before going to bed at night, as one of those last unfinished tasks of the week. The quick order list also provides immense convenience of being able to order regularly needed items on a periodic basis with the click of a button, rather than having to manually inspect the inventory at home and write out a list of items to be bought.

But one of the main areas of challenge for Aaramshop is to publish the retailer inventory accurately online since most retailers do not have barcodes or efficient processes in place that can reflect the real-time inventory in shops. But, as the number of Aaramshops increase, these processes can be driven by Aaramshop as part of the sign-up process for each retailer.

The way ahead
Where Aaramshop will score over other online grocery retailers is the simplicity of their model, where you don’t have to wait for your grocery orders to arrive in 48 hours from a central warehouse; they are sourced from a neighbourhood shop that you may have already shopped from. There is long term sustainability of the model and it is not based on heavy discounting to attract customers and there is no disruption of the distribution or financial models, but an efficient integration of the existing retail eco-system and adding more aaram (comfort) to the lives of shoppers.

Imagine a scenario, a year down the line, given the velocity of Aaramshop adoption by kirana store owners. Let us assume that 60 per cent of kirana stores in urban India (Tier 1, Tier 2 and Tier 3 cities) join Aaramshop – there is no monetary might in the world that can beat this ecosystem, leave alone big box modern retailers. To further ease the shopping experience and reduce shopping time, personalised quick order lists based on the buying behaviour of customers can be activated by the consumer, through the click of a button online. I can envisage FMCG companies lining up to provide customised discounts to the shoppers to maintain and build brand loyalty. The brands would see a quantifiable return on their promotion spends through data captured by Aaramshop and slowly move away from big ticket advertising spends where you can’t measure or capture your returns easily. The list goes on…

Online grocery shopping in India is at a nascent stage, but it has tremendous potential to catch up like wildfire. Though the first Prime Minister of India had famously said “Aaram Haram hai” (comfort is sinful), this is one comfort which the time-starved, urban Indian shopper will dive sinfully into.

**Aaramshop is the winner of top 100 Red Herring Global Awards.


Snehamoy Mukherjee leads the analytics practice at Technopak Advisors and has over a decade of experience in the analytics industry having worked in multiple domains like retail consulting, FMCG /CPG, insurance and market research. Prior to joining Technopak, he was director of analytics with Dunnhumby, the premier retail consulting organisation in the U.S. and Europe.