There has been a lot of noise lately (including the recent article that appeared on Livemint “The great Indian grocery gig in the sky“) with regards to how e-commerce players are trying to tap into the Kirana store network to gain an advantage over its rivals and capture market share in grocery space.
Shopper behavior in grocery space is quite different from other categories as it usually consists of 90% fulfillment and just 10% shopping & discovery. If e-commerce players in grocery space want to scale-up, they have to leverage the hyper-local assets of the Kirana stores for inventory, merchandise, and delivery. Currently, there is a disparity between the SKUs (price, quantity, availability, etc.) that the consumers buy from Kirana stores v/s what they buy online i.e. the fill rate of actual bills of Kirana stores across e-commerce players is not high. This is because the Kirana stores have hyperlocalized their merchandise to suit the local population and to service across SECs in the locality (not to mention the high degree of personalization they offer!).
On the supply side dynamics, the distribution is a competitive edge of major FMCG players in India. Moreover, only 15%-20% of the SKUs of these players enjoy great pull and velocity. These distributors ensure the rest of the SKUs reach the shelf and therefore, any material disruption of the supply chain will not be encouraged by the major players on a sustained basis. Moreover, these major players understand that consolidation will only drive their gross margins south.
Also, the ecosystem players (FMCG players, distributors, wholesalers, etc.) are currently operating/working with these Kirana stores without fully understanding what is happening exactly inside these stores! While the new-age eB2B players (Jumbotail, ShopX, Udaan etc.) may penetrate the under-serviced market, they will struggle down-stream on unit economics. More importantly, the FMCG marketers play an important role in this ecosystem and their perspective on all that is happening is yet to be played out.
At the end of the day, India is nothing but a strong network of people, whereas, America is all about standardised processes. Therefore, the models developed in the US may not work here in India until and unless the core fabric of the industry – Kirana stores are included in these new-age models
SnapBizz has been transforming Kirana stores into smart stores and leveraging these stores’ strengths so as to enable the latter to gain a competitive edge; and at the same time, facilitate the FMCG eco-system to optimize its relationship with stores and their customers.