by N.S. Venkataraman 14/5/2018
The recent announcement by Walmart that it would enter into 16 billion USD deal by acquiring 79% state in Indian online retailer Flipkart appears to have caused considerable anxiety amongst the small and medium scale shop keepers and what is known as Kirana stores in India. This largest e-commerce deal in India has been opposed by the small and medium traders, who seem to fear that they would be thrown out of business and several thousands of people involved in such small trade would lose jobs.
However, a careful analysis of the overall scenario and clear understanding of the ground realities would abundantly make it clear that such apprehensions have no sound basis and are born due to lack of clear understanding of the various aspects of trade in a developing economy.
Dominating presence of Kirana stores (neighborhood retail stores)
It is reported that there are around 13 million shopkeepers / kirana stores in India, operating at tiny and small scale level in the unorganized sector. They are well spread throughout the country including rural areas and remote villages. They largely cater to the consumers in the nearby localities, who mostly belong to middle and lower income group and buy a small quantity for their immediate requirements. Such items sold are largely groceries, hardware items, toiletries, dairy products, medical stores, etc. which are fast moving products and with most of them having a low shelf life.
Kirana shops, which are off line traders, meet the sentimental requirements of the buyers to see the product, touch and buy, making their choice and such needs are not met by e-commerce companies. This is a significant striking advantage for offline traders and shopkeepers, which would stand them in good stead.
Most of such Kirana shops also extend small credits to the familiar and loyal customers, which help them in retaining their client base.
The advantage of these Kirana shops is their low investment and consequent low overheads, with many of them operated by family members.
It is impossible to visualize trading activity in India without such Kirana shops, which are in thousands and which are elegantly meeting the vital needs of people belonging to the middle and lower income group and competently fulfilling their expectations. They are essential and integral part of Indian trade and business structure.
No need for apprehension for Kirana shopkeepers
The fear of the Kirana shopkeepers appears to be the possible comparatively low pricing business model of large e-commerce companies, which can offer discounts and incentives to promote the sale. By adopting the information technology practices and modern trade procedures, they will have a huge competitive advantage over the small shopkeepers. Further, since such large e-commerce companies operate in large scale with high turn over and procure the products for marketing at a comparatively low cost given the large quantity of requirement, their competitive muscle power to operate in the trade market vis a vis the Kirana shops would be much higher and stronger.
While the above views are logical and appropriate, it is necessary to keep in view that such advantages of e-commerce companies will not by themselves upset the prospects of the Kirana shops, since the Kirana shops have their essential role and significance in the trading sector.
Enough space for e-commerce companies & Kirana shops :
It is estimated that the trade market in India is steadily increasing at around 6 to 7% per annum in tune with the overall GDP growth of the country and rising per capita income. The share of e-commerce is presently only around 2.5% of the overall Indian trade market of around Rs. 45 lakh crore. While the growth in the trading activity will be well sustained and with the market steadily expanding, there would be enough space for both e-commerce companies as well as the Kirana shops.
E-commerce companies like Flipkart and Amazon have been operating in India for quite a long time now, and they have not adversely impacted the performance of the Kirana shops in any visible manner.
All said and done; it is necessary to keep in mind that whether e-commerce marketers or Kirana shops, they have to necessarily cater to the expectations of the consumers at various levels. With the rapidly developing technology practices and steadily expanding economy, modernization of retail market at every level cannot be avoided.
In recent times, it is seen that even many such small shopkeepers have been responding to the changing expectations of the consumers in a variety of ways.
Presently, the e-commerce marketers essentially meet the requirements of only such customers, who can wait for a few days to get their products and such products generally have a long shelf life and the clients have to make the immediate payment in cash or by digital mode to the delivery agents. It is estimated that at present only around 50 million people in India shop online and this number will increase in the coming years. However, a such number of online buyers are unlikely to make a big dent in the overall trade market in India, given the large Indian market size, which is steadily expanding.
Further, it should be noted that no buyer exclusively goes for shopping online and the buyers shop both online as well as buy from the physical market depending upon the products and their need.
Let not the competitive ability of Kirana shopkeepers underestimated :
In the coming days, convergence between offline and the online retail market is bound to take place, and in all probability, several presents offline traders like Kirana shops will also resort to online trading in the small and medium way while continuing their existing activity and will mature into larger traders.
It is necessary not to underestimate the capability and dynamism of traditional operators of Kirana shops in India, who have grown with the times and will continue to do so.