Transformation of Indian Retail: The Rise of Kirana Stores

By Ankit Narayan Singh Co-founder and CTO, ParallelDots

The Indian retail landscape is poised for a significant transformation, with traditional Kirana stores at its epicentre. These small, family-operated shops have long been the cornerstone of Indian retail, offering personalised services to their clientele. Accounting for nearly 90% of India’s massive $1.3 trillion retail market, Kirana stores are a force to be reckoned with. Yet, the emergence of e-commerce and modern trade stores presents a formidable challenge, enticing customers with lower prices across a diverse product range.

Despite the looming threat posed by e-commerce and organised retail chains, Kirana stores are seizing numerous opportunities to not only survive but to flourish. The advent of artificial intelligence (AI), analytics, and government initiatives such as the Open Network for Digital Commerce (ONDC) is fortifying these modest establishments, propelling them to become titans within the Indian retail sector.

The role of AI and analytics

AI and analytics are revolutionising the Kirana store model, equipping these enterprises with a sophistication once exclusive to their larger counterparts. Utilising data science, Kirana stores can fine-tune their inventory, anticipate demand, and tailor their services to each customer. Startups and FMCG companies both are leading this charge, offering AI-driven tools that enable Kirana stores to tap into big data. These innovations facilitate the tracking of sales trends, more efficient supply chain management, and predictions of customer buying patterns.

The democratisation of advanced technologies is doing more than just bridging the gap for Kirana stores amidst the fierce competition from retail chains and e-commerce giants—it is also establishing them as hotbeds of innovation. As we delve deeper into this article, it becomes evident that numerous enterprises have pinpointed Kirana stores as fertile ground for innovation, recognising the immense potential they hold for building big businesses through the strategic application of AI and analytics to revolutionise their operations.

Government initiatives: ONDC

The ONDC initiative heralds a new era for Kirana stores. Backed by the government, this platform aspires to democratise digital commerce, levelling the playing field for small retailers by enabling online sales. ONDC functions as an aggregator, allowing Kirana stores to showcase their products alongside e-commerce behemoths, thus amplifying their visibility and granting access to the same digital infrastructure that supports large online retailers.

With ONDC, Kirana owners now have the opportunity to reach customers beyond their local neighbourhoods and significantly boost their sales. ONDC’s ecosystem partners are instrumental in this transformation, helping store owners to digitise their inventory, streamline online order fulfilments, collect online payments, and facilitate in-store pickups. This shift is particularly revolutionary in India, where the convenience of online shopping can now be extended to a vast array of products across millions of Kirana outlets.

As the ONDC network grows, the integration of AI and machine learning technologies will further refine inventory management, enabling Kirana store owners to align their stock with consumer demand more accurately. This is a stark contrast to the current scenario, where digital data is scarce, and most Kirana purchases remain untracked. ONDC not only promises to open up access to a wider range of products at competitive prices but also empowers Kirana owners with the confidence that they are investing in inventory that meets their customers’ needs and preferences. For years, this has been a secret sauce of the likes of Amazon and big retailers to offer competitive prices to their customers by closely aligning demand with supply through advanced analytics.

Startups empowering kirana stores

Innovative startups are equipping Kirana stores with data-driven backends through user-friendly interfaces. Gurgaon based ParallelDots is aiding store owners with a mobile app that simplifies the digitisation of store inventory with just a few photographs of their shelves. Utilising image recognition technology, this solution swiftly identifies brands in these photos, streamlining the inventory onboarding process. Another challenge faced by store owners were related to working capital requirements, which is now solved by fintech players like Paytm and Phonepe through disbursement of paperless loans based on the turnover of the store.

Quick commerce startups like Blinkit and Zepto are utilising some of these stores as fulfilment centres for orders generated on their platform. B2B ecommerce players like Udaan are allowing Kirana owners to access a vast portfolio of products at competitive prices that they can order online.

How FMCG brands stand to benefit from the kirana renaissance

In the face of intense competition from modern trade and e-commerce, Kirana stores have demonstrated exceptional resilience, a reality acknowledged by FMCG brands. Progressive FMCG companies are investing in tools that not only enhance their presence in this channel but also ensure mutual growth with Kirana partners. HUL’s Shikhar app, for instance, has successfully integrated over a million outlets, simplifying the product ordering process online.

Similarly, P&G’s ‘Smart Basket’ initiative exemplifies the strategic application of data science to cater to the unique demands of local communities, optimising inventory and guaranteeing the availability of consumer-preferred products. This initiative has been instrumental in reducing surplus stock and improving the operational efficiency of Kirana stores.

The future of kirana stores

The outlook for Kirana stores in India is promising. Bolstered by AI, analytics, and initiatives like ONDC, these stores are well-positioned to rival modern trade and e-commerce entities. They are evolving from traditional brick-and-mortar establishments into advanced retail hubs capable of satisfying the needs of today’s consumers while preserving their inherent charm.

As they adopt new technologies and platforms, Kirana stores are set to prosper, continuing their role as the dynamo of Indian retail. The ongoing transformation of Kirana stores is a tribute to the persistent spirit of innovation that defines India’s commercial ethos and community values, extending from bustling urban centres to the heart of rural landscapes.