Covid-19 outbreak brings local shops to the forefront of e-tail sector
The coronavirus pandemic has shuttered mom-and-pop shops in the US. In India, these retail stores, rich on legacy business skills, are emerging intact, albeit a little bruised.Updated: May 01, 2020 09:00 IST
The Covid-19 crisis has spurred a new wave of online and phone commerce, powered by millions of kirana stores, or local mom-and-pop shops, small merchants, cycle-riding delivery men, distributors on scooters, even farmers.
The coronavirus pandemic has shuttered mom-and-pop shops in the US. In India, these retail stores, rich on legacy business skills, are emerging intact, albeit a little bruised.
The dependability, deep trust and unique relationships of these neighbourhood enterprises with millions of middle-class consumers have made them resilient and a darling for big tech. These shops account for 80% of the country’s retail sector.
As a punishing lockdown broke the back of big online retail in Indian cities, the country’s 8 million kirana stores have kept supplies going, thanks to their human and often personal network with consumers, suppliers, vendors and distributors.
Small stores have been able to home deliver goods profitability, or at least without incurring losses. One analyst, who did a survey for a large firm said on condition of anonymity that this is a surprising discovery. “They have well established rules. For example, no delivery beyond a radius 3 km. Some deliver using cycles. That makes economic sense.”
On April 22, social media giant Facebook announced a $5.7-billion investment in Jio Platforms Ltd, owned by Reliance Industries Ltd, aimed at leveraging WhatsApp’s 400 million subscribers to connect small stores and consumers. According to a report by JP Morgan this week, with this, WhatsApp could soon offer a shopping option to users.
“Our focus will be India’s 60 million micro, small and medium businesses, 120 million farmers, 30 million small merchants and millions of small and medium enterprises in the informal sector,” Reliance Jio said in a statement.
When in January of this year, the world’s richest man, Amazon’s Jeff Bezos, visited India, he too promised $1 billion in new investments to bring small businesses online.
“So, how will this work?” asked Delhi’s Mohit Aggarwal, the proprietor of Santoshi Stores, when a surveyor called him this week, seeking to on-board his store on to a bigger online retailing platform. The surveyor was hired by a retail company that Aggarwal did not want to name.
Aggarwal says he received an online tutorial that revealed an ambitious plan to bring millions of shops online. A dummy site explained how. The retailer’s site essentially acted like an online aggregator of hyperlocal mom-and-pops. After a shop is on-boarded, its inventories are monitored real time. While the front end connects the small shops to consumers, the back-end connects them to distributors.
Consumers can click for orders and also send their shopping list via WhatsApp, which will also act as a payment transaction app.
JioMart platform, the e-commerce venture of Reliance Retail, plans to have 5 million digitised mom-and-pop stores by 2023. Its mega deal with Facebook gives it a ready consumer base of 400 million WhatsApp users in India.
The platform has started trials for grocery orders on WhatsApp in Navi Mumbai, Thane and Kalyan, according to a report by Credit Suisse Ltd.
“The customer initiates the interaction on WhatsApp, checks out the grocery order on JioMart webpage, gets connected with a retail store on WhatsApp and then customer picks up the order from Kirana and pays in cash,”the report added.
Analysts see a revolution similar to the one preceding it in the digital payments ecosystem. “On the one hand, JioMart could enable inventory and back-end supply chain for small shops, on the other, the WhatsApp platform could enable ordering and payment providing seamless customer experience,” Edelweiss Securities Ltd said in a report on the deal.
Amazon India already features a “Local Shops on Amazon” to take local shops live. Flipkart said it is working with 37,000 kirana shops and ramping up further to “serve the new set of consumers who are more tech-savvy and want personalized services”.
According to a report by Deloitte India and Retail Association of India, India’s e-commerce market is growing at an annual clip of roughly 51%, the highest globally.
“As more people join the internet economy (internet penetration is expected to almost double to 60% by 2022) and continue to get accustomed to their new online lives, the e-commerce industry is expected to grow into a 100 billion USD market by 2022,” said Sankalpa Bhattacharya, partner and leader, PwC India.
The Confederation of All India Traders (CAIT), a traders’ lobby, and the department for promotion of industry and internal trade (DPIIT) have also decided to launch an e-commerce platform for local retailers and grocery stores, CAIT Secretary General Praveen Khandelwal said.
CAIT has often complained about predatory pricing of large e-tailers. Its entry into the kirana game could level the playing field and bring more options to small stores.
A federal push to free up agricultural markets, opaque and tightly controlled by layers of intermediaries, has come as a shot in the arm, said Amit Kakkar of Comtrade. He said the biggest upshot of the new push, from a consumer perspective, is quick deliveries and turnaround times because it is a hyperlocal transaction.
Under the Agriculture Produce Marketing Committee Act, farmers could previously only sell their harvest at designated markets. This rule has been suspended, giving farmers the freedom to sell to remote buyers.
The new e-commerce model plans to get on board farmers and millers too so that it’s actually a farm-to-fork supply chain.
Kirana stores have the right enterprising quality and a very loyal customer base. “The only missing thing was technology. This is where we come in to make them more efficient,” said Samarth Agarwal, founder and CEO of MaxWholesale, an online platform for kirana stores to place inventory orders.