Kirana – Small but omnipresent
Small, owner-operated grocery stores like Nagesh Prabhu’s can be found on almost any street corner all across India. These ‘kirana stores’ play an essential role in the everyday life of the country’s roughly 1.3 billion inhabitants. They are deeply rooted in Indian society and an integral part of local economies. Although they are highly valued by Indians, even kirana stores must keep up with the times if they are to be prepared for the decades ahead. METRO India supports kirana store owners in modernising their operations and outfitting their businesses with new technology. Additional help comes from emerging start-ups with which the wholesale specialist collaborates – and which are becoming increasingly important in India.
Malleswaram, a residential district in north-west Bengaluru, is famous for its old temples. In the narrow, bustling alleys, everyone knows the way to Nagesh Prabhu’s shop. The little grocery store measuring just over 9 square metres has been in his family for 5 decades. It is one of the many neighbourhood shops in Bengaluru, the capital of the state of Karnataka in southern India. Nagesh Prabhu and his wife cater to the residents of their urban neighbourhood, who can buy all their day-to-day requirements here from early morning till late in the evening – everything from soap and cleaning products to coffee, juice, rice and lentils. The 51-year-old knows exactly what his customers want and need. His assortment consists of around 1,000 items but is tailored exactly to his patrons’ preferences. Nagesh Prabhu greets his regular customers by name. No one knows them as well as this man with the bushy moustache does – especially not the supermarket chains.
With over 1.3 billion people, India is the second-most populous nation on earth, after China. Most people earn a living from agriculture, followed by the service sector. This South Asian country, covering most of the Indian subcontinent, is a nation of small and medium-sized businesses. Nearly 12 million grocery stores like Nagesh Prabhu’s shop dot the country. With their limited space and comparatively low inventories, these small, owner-run kirana stores are much easier to run than a big supermarket with high investment costs and stock levels.
Kirana stores constitute an ecosystem that has grown over decades. They account for over 90% of the Indian food retail sector and are thus omnipresent. Found on almost every street corner, even in rural areas, they are a part of Indians’ everyday life. They are deeply rooted in society and form an integral part of the economy. Some of these shops are passed down from generation to generation – and the same local families have likewise been shopping in them for generations.
Most kirana stores are crammed full, with products stacked along the walls and hanging from the ceiling. A wild jumble in which, at best, only the owners know what is to be found where – and therefore must gather the goods for their customers’ purchases themselves. Customers traditionally pay in cash, but regular patrons can also buy on credit. For local residents, these stores are an easy, convenient place to shop. In India, if you are looking for ingredients for regional or local dishes, you are more likely to find them in a kirana store around the corner than at a fancy supermarket. Small purchases can even be delivered in less than an hour. The proprietors’ understanding of their customers, acquired over decades, the shops’ immediate proximity and the product assortments tailored to the locals’ basic needs make kirana stores and their owners unique. They serve a vital purpose as one-stop neighbourhood shops, with a local clientele that both relies on and greatly values them.
Competition from e-commerce
Nagesh Prabhu’s most loyal customers have been coming to his shop for decades. Business was always stable, but never improved and so was at risk of coming under pressure. Although the kirana stores are doggedly fighting the big, upscale supermarkets and shopping centres, competition – especially from online shops and delivery services – is growing all the time. In addition, many shopkeepers continue to run their businesses, from record-keeping to stocking the shelves, using the same rather inefficient methods that their ancestors did. At some point, Nagesh Prabhu also realised that he needed to move with the times and modernise his business to equip it for the coming decades.
He found support from METRO India, where he has been a customer since the first wholesale store opened in Yeshwantpur, Bengaluru, in 2003. By offering competitive prices, relevant product ranges, fast delivery, digital solutions, technical and business expertise and special credit terms, the approximately 5,000 METRO employees are making the kirana stores fit for the future. The aim is to enable shopkeepers like Nagesh Prabhu to expand their businesses and increase their margins through improved planning.
Arun Kumar is another kirana store owner who ran his small MP Store in Srirampura, Bengaluru, in the traditional way for many years. Products were stacked wherever there was space. Product placement and inventory management were nowhere to be seen. Everything depended on cash. Things are different now, but it took a painful realisation to make Arun Kumar change direction. He discovered that his best customers were increasingly shopping with another dealer – an online shop. He was at risk of losing a large proportion of his regular clientele. Like Nagesh Prabhu, he too understood that he needed to adjust his business to the changing requirements.
So, in December 2018, Arun Kumar met the team from the Kirana Success Centre at the METRO wholesale store in Yeshwantpur, Bengaluru, which had been inaugurated just a few months earlier by METRO member of the Management Board and Chief Operating Officer Philippe Palazzi. METRO employees guided the shopkeeper through the Smart Kirana Programme. For Arun Kumar, almost everything changed. He revitalised and digitised his shop, all in just 48 hours. Entering his store today, the customer has a completely different feeling than when stepping into one of the many overfilled and chaotic old corner shops on the streets of Srirampura. The fittings are modern. The goods are neatly placed in shelves and cabinets that line the walls. This gives customers a good overview and provides more storage space than before. And Arun Kumar also uses the digital point of sale (POS) system.
The POS system is based on a touchscreen terminal with which the kirana shopkeeper can do just about everything. One of the things Arun Kumar uses it for is inventory management. When stocks start running low, a message is displayed, and he can order more from METRO directly via the system. This allows him to make the most of the limited space in his small shop. The software also gives him an overview of his sales and profitability, and calculates which products are selling well and which ones bring the highest profits. The terminal accepts all digital payment methods and produces invoices that are compliant with goods and services tax (GST) regulations. This is important, as the GST, similar to VAT, has been charged on all purchases in India since July 2017. In addition, Arun Kumar can use the system to run special promotions to attract customers, sending out offers by text or e-mail. With the kirana stores app developed by METRO India, his customers can place orders online. He now delivers goods faster than any other delivery service.
His success is impressive. His business has grown by over 40% in the past 9 months.
The project Arun Kumar embarked on with METRO India in December 2018 hasn’t always been easy. His father was initially very apprehensive that remodeling the store would only lead to higher costs and wouldn’t bring any benefits. Despite his worries about intensifying competition, he accepted the status quo. However, his son persevered. Now the whole family is delighted with the outcome. For Arun Kumar, it is ‘the best thing that has ever happened to my shop’. He believes his store is now just as good as any of the big supermarkets in the shopping centres. ‘Modernising has helped me keep my existing customers and attract new ones,’ he says. ‘The promotional offers let me reach out to shoppers who are interested in higher-quality products.’
Life and work have become much easier for me and my wife. We no longer have to record invoices or check stocks manually. Now we have more time to look after our daughter.
Nagesh Prabhu, Kirana store owner
Like Arun Kumar, Nagesh Prabhu has also taken the plunge and gone through the Smart Kirana Programme. He has increased customer visits from around 250 to over 900 a month – and there is no longer any question of his business stagnating. He has increased sales by around one third. ‘Life and work have become much easier for me and my wife,’ he says. ‘We no longer have to record invoices or check stocks manually.’ And he notes that he no longer needs temporary staff to help fetch products for customers, who can now pick products from the shelves themselves. He and his wife can even manage with only one of them in the shop. ‘Now we have more time to look after our daughter,’ he says.
METRO is a pioneer in India. It laid the foundations for the cash & carry format in 2003. METRO India has been growing ever since, along with its customers, including traders of all kinds and small and medium-sized businesses. Over the years, the company has kept on increasing its understanding of what local customers need – not just in terms of products, but also in terms of (digital) solutions and services. METRO India now has a keen sense of people’s eating habits, which can change every 15 to 20 kilometres in a market this big and diverse.
Today, METRO India has more than 1 million active customers and is one of the leading wholesalers in the country, with 27 wholesale stores working with over 5,000 local suppliers. Local small and medium-sized Indian businesses are the source of 99% of the products that METRO sells. These include, for example, cleaning solutions produced in India by the domestic Asha Chemicals brand, such as dishwashing detergent and general-purpose cleaner that is sold under the METRO own brand Aro. This is another way in which METRO India is strengthening entrepreneurship in the country.
1,200 kirana stores digitised
The focus, however, is on the neighbourhood shops, which account for around 40% of sales. ‘We want to support the kirana stores so that they stay relevant,’ explains Sebastian Vempeny, Head of METRO India’s Smart Kirana Programme. ‘The priority is to increase sales and profits. To do that, we convert the shops into self-service stores and strengthen them with modern technology.’ The Kirana Success Centre offers everything under one roof: products, services and solutions. The offerings are aimed at all kirana stores, regardless of size, and can be implemented very fast.
We want to support the kirana stores so that they stay relevant. The priority is to increase sales and profits. To do that, we convert the shops into self-service stores and strengthen them with modern technology.
Sebastian Vempeny, Head of Smart Kirana Programme, METRO India
So far, METRO India has digitised over 1,200 Kirana stores throughout the country and has plans to expand the Smart Kirana Programme significantly. In addition, a partnership with another start-up, ePayLater, has recently been announced. Together, the fintech start-up from Mumbai, founded in December 2015, and METRO India have developed a mobile app called Digital Shop. The app lets kirana store operators use their own smartphone to digitally track their daily and monthly sales, manage their inventory, place orders with METRO and offer digital payment options to customers.
India’s start-up scene is booming. The country is seen as one of the most promising start-up hubs in the world. Some people are even talking about a new Silicon Valley in the tech metropolises of Delhi and Bengaluru. Growing numbers of investors have increasing amounts of capital at their disposal. Because of its population, the country offers not only plenty of skilled workers, but also huge numbers of consumers. In addition, the Indian government has plans to improve conditions for start-ups. By no means do all start-ups succeed in identifying the right segment for their business, however. Many of them lose their orientation in the enormous market of possibilities and go in the wrong direction. So, it isn’t surprising that many young businesses end up closing down because of a lack of scalability.
This is why METRO India supports local start-ups that are involved with new food trends and food industry technologies. To accelerate their growth, the start-up teams receive access to the wholesaler’s network and customers, as well as practical support. Some of them have since expanded their businesses across several cities, serving millions of customers and employing hundreds of staff. METRO India benefits from their involvement too. ‘We work with over 30 food and tech start-ups and are constantly on the lookout for new partners who can expand our range of products and services and help improve our customers’ experience,’ says Vineet Saksena, who is responsible for managing METRO India’s range of food products and services.
We work with over 30 food and tech start-ups and are constantly on the lookout for new partners who can expand our range of products and services and help improve our customers.
Vineet Saksena, METRO India
One example is Chef Basket, a brand created by the Fizzy Foodlabs company, which was set up in 2012 in Mumbai by Varun Jhawar, Nipun Katyal and Manish Tirthani. The 3 founders wanted to develop and sell convenience food products that matched the lifestyles of young, ambitious, urban Indians – including in terms of packaging and design. Chef Basket was launched a year later. Their vision was to bring international dishes like Thai green curry, pasta Alfredo and chocolate trifle into Indian kitchens in a form that was as easy and practical to prepare as ready meals, but contained healthy, natural ingredients at affordable prices. Like most start-ups, Fizzy Foodlabs struggled to expand.
The team therefore pinned their hopes on the partnership with METRO India. This was agreed in 2015 and marked a turning point for the 3-member team. For a new brand, particularly in the world of fast-moving consumer goods, the most important thing is to be visible, especially at the beginning, and to reach as many potential buyers as possible. After all, it is important to get as much feedback as possible before investing lots of energy and money in the roll-out. METRO India proved to be one of the most important sales channels for Chef Basket, as it gave Fizzy Foodlabs access to more than 1 million active customers across India.
‘The collaboration with METRO benefits us in 2 ways,’ explains Nipun Katyal, co-founder of Fizzy Foodlabs. ‘Firstly, we can increase awareness of our Chef Basket brand and, secondly, as a start-up with limited options, we gain access to retailers.’ Thanks to METRO, Nipun Katyal says, they have reached a large number of relevant retailers in a short time. ‘We have worked with the category managers to define and implement targets.’
Young, ambitious start-up owners like Nipun Katyal of Fizzy Foodlabs and well-established kirana store owners like Nagesh Prabhu have one thing in common: they have dared to embark on a new journey with METRO India. And it has paid off.
- 27 wholesale stores
- 776 million Euro sales in financial year 2017/18
- around 5,000 employees
- over 1 million active customers
- around 5,000 suppliers
- approx. 1.3 billion inhabitants
- 12 million Kirana stores, share: 90 percent of Indian food retail trade
- In 2018, a good 1,200 new start-ups were registered in India, mainly in the areas of logistics and transport, software and information technology, fintech and online marketplaces
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