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Why are kirana stores hesitant to partner with Reliance, Amazon and Flipkart?

While Reliance claims to have already on-boarded 25 lakh kirana stores, Amazon and Flipkart say they have 23,000 and 17,000 kirana partners in their network

twitter-logoAjita Shashidhar | November 9, 2019 | Updated 03:23 IST
Why are kirana stores hesitant to partner with Reliance, Amazon and Flipkart?

Scores of reports have been written on how retail biggies want to empower the humble neighbourhood kirana store owners. While some are using them as last mile delivery points, the rest are getting them to buy their inventory from them, thereby nudging them to get rid of traditional distributors. Reliance Industries Chairman Mukesh Ambani himself announced at the recent RIL annual general meeting about his vision to make livelihood better for the 12 million strong kirana store network on the back of technology, which will help kirana store owners to manage their billing, inventory and margins far more efficiently apart from a host of other benefits. While Reliance claims to have already on-boarded 25 lakh kirana stores, Amazon and Flipkart say they have 23,000 and 17,000 kirana partners in their network.

Reality, however, is quite different. The neighbourhood stores are skeptical about partnering with these biggies. Anuj Agarwal runs a small grocery store in Palda in the outskirts of Indore. A second year college drop-out (who runs his father's shop), the 20-year-old from no angle seems technologically challenged. For, as he attends to his customers, he finds enough time to pose for a selfie, which he promptly posts on Facebook. He also finds time to play a mobile game during the free time he manages while attending to consumers. But the moment he is asked about partnering with the likes of Reliance, Flipkart or Amazon and do business through their apps, it's a vehement no. "If I start ordering inventory through the day browsing through apps (his phone has a host of apps from HUL's Shikhar to Udaan) how will I attend to my customers?" he questions.

As Agarwal attends to his customers, a distributor of Anik Ghee walks into his store and Agarwal quickly tells the distributor to give him a few 500 ml packs and goes back to attending his customers. "I can deal with distributors while I attend to my customers, if I start using apps how will I attend to customers. Mine is a one-man store," he says.

Hemant Bhai, who runs a kirana store in the adjoining residential area of Manish Baugh has similar concerns. He also says that apps don't understand his needs. "They often don't have what I need. I always prefer a distributor as he knows what kind of pack sizes sell in my store and gives me only those ones."

The biggest issue all of them have with organised retail biggies is credit. Traditional wholesalers and distributors give them a week-long credit, which organised retailers don't. The kirana store economics has always worked on credit. The kirana store owner buys his inventory on credit, sells the inventory and then pays the distributor. "Distributors understand our needs. If I have a problem with a particular SKU, the distributor takes it back without asking too many questions, big retailers don't take back inventory which we can't sell," says Roopchand Bagmar, a kirana store owner in Nashik.

Kirana store owners in Mumbai, however, aren't as averse to doing business using technology. Vipul Shah, a kirana store owner in the western suburbs of Mumbai, says he uses Big Basket's B2B app to order small portions of inventory, but he always prefers buying from the traditional distributor. His reasons are similar to those of kiranas in the smaller cities of Indore and Nashik. "The distributor understands my needs better and most importantly gives me credit." Shah mostly buys premium products such as green tea or even Coke from the online apps.

But both Shah and Agarwal at Indore or Bagmar in Nashik are averse to the idea of installing point of sale machines (PoS) the likes of Reliance are asking them to use. "If we instal their machines we will be forced to buy from them and we can't afford to put off distributors who have been working with us for decades," explains Shah.

Retail industry experts don't buy this argument in totality as they believe that one of the reasons kirana store owners are hesitant to join the digitisation bandwagon is because they don't want to declare their earnings and pay taxes. Bulk of kirana store owners claim that they earn much below Rs 40 lakh per year in order to avoid taxes.

While technology is something they clearly don't want to use, are they open to becoming last mile delivery points of Amazon or Flipkart? Space is a constraint. "Where do I store their inventory? I need space for that," says Agarwal. This explains why likes of Amazon and Flipkart are looking beyond kiranas, at beauty parlours, local gyms and tailor shops as last mile delivery points, as they have more space. Even though kirana stores would be happy to partner with these retail biggies, space is surely a challenge for them.

Will the 12 million strong neighbourhood stores ultimately succumb to the pressure of big retail giants? Although the immediate response is that they would not join, when probed a little, kirana store owners do see themselves as part of a network of a big retailer. "Distributors are already nervous of losing business. I never tell them that I also buy through apps because I know they won't like it," says Shah.

The biggies, however, need to do a lot more before they can actually convince kirana store owners to be part of their network.

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