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What is driving the rise of Kirana?

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What does Bounce - a smart mobility solution provider, Swiggy - a major food-tech player, Big Basket - an online food and grocery store, Shadowfax—a last-mile logistics provider, PhonePe - a payment platform, e-commerce majors Amazon and Flipkart and Reliance, India’s largest conglomerate have in common?

All of them are banking on the humble kirana shop in your neighbourhood to solve critical problems and propel them in their next phase of growth. The 12 million-odd kirana stores that dot India have become a valuable last-mile connector for all these companies. In today's post we analyze how firms are rushing to partner with these kirana chains, what makes kirana stores tick, and the road ahead for the humble neighbourhood store.

The rush to partner

Reliance is looking to change the face of Indian commerce through JioMart and Facebook-owned Whatsapp. Amazon’s “I Have Space” programme — a hyperlocal delivery and pickup service specifically targeted at kiranas has been instrumental in increasing the outreach of Amazon in Tier 2 and Tier 3 cities. 70% of all deliveries on Myntra is handled by its MENSA network of 15,000 partner stores. Bounce is turning kiranas into storehouses for EV batteries or sites for battery charging. Bigbasket is trying to replace the kirana’s traditional wholesalers while Grofers is morphing kiranas into stocking points of its private-label brands. Dunzo and Swiggy have tied-up with shops to create digital storefronts that customers can order from through their respective apps. PhonePe is even attempting to turn them into ATMs!

But how has the kirana store, which is looked down upon for its operational inefficiencies when compared to D2C brands and written off after the advent of e-commerce and FDI reforms, evolved to become such an important component in India’s startup landscape? These ubiquitous kirana stores still rule the roost in India grocery market, which is set to grow from about $550 billion in 2019 to nearly $1 trillion by 2023 with organized retail accounting for just above 5% of this market. The kiranas also account for almost 90% of the $44 billion of FMCG goods sold in India every year.

What makes them tick So what’s behind the enduring appeal of kirana stores? While they can hardly compete with big-box retailers and e-commerce platforms on price, they bring the following elements to the table:

● Trust: Having been a part of the lives of people in the neighbourhood for a long time, especially in tier 2/ tier 3 cities and rural areas, kiranas have developed personal relationships with their customers. Hence local customers trust the kirana owners more than e-commerce platforms, especially in their sphere of influence.

● Accessibility: Kiranas can be found far and wide across India, even in the most inaccessible rural areas.

● Convenience: They accept orders via phone or WhatsApp and provide home deliveries within hours. Most of these shops also extend monthly lines of credit through khata accounts for their frequent customers.

● Personalization: Having granular information on customer’s buying preference, they are nimble enough to identify and serve changing shopper aspirations and needs. Even with fewer SKUs, you are likely to find the most locally relevant assortment of goods at these stores.

With small traders and retailers being a core political constituency of the ruling BJP, the Indian government has also sought to protect them from predatory practices of competing e-commerce companies.

And this coronavirus epidemic has just underlined their importance further. While online portals failed to handle an unprecedented surge in order volumes leading to stockouts and found it difficult to deliver existing orders, these neighbourhood stores stepped up to fill the void. With supply chains disrupted and migrant labourers going back to their villages, the owners of these stores relied on their existing relationships with manufacturers and distributors, ties with local brands, buffer stocks and their families to keep delivering essentials to the neighbourhood. To adapt to the COVID-19 enforced changes, they have increased operating hours, started taking orders on WhatsApp, delivering to homes, and bringing items from distributors themselves in the absence of transporters. Grocery shopping in kirana stores during the lockdown has witnessed a 39% growth, as per a recent report on Indian food retail by McKinsey.

The rise & rise of India's kirana

Hopefully after the virus is gone, the kirana stores can use the connections created during this pandemic to keep the customers coming back. They might also use the extra sales generated during this time to invest back into their stores to become more competitive. The McKinsey report says that 29 % of shoppers have shown an intent to go back to their good old neighbourhood kirana stores even after the pandemic subsides.

This makes their case stronger to the companies which envision these kiranas to become the pulsating nerve centers of the coming e-commerce and digital payments revolution focussed on smaller cities and beyond, by transforming them into virtual hubs of demand, supply and transactions. Among those lining up to help the kiranas evolve are supply chain players such as Udaan, Jumbotail and Ninjakart, catalog and inventory management startups such as PhonePe, Snapbizz and Store King and PoS and billing solution providers such as Metro Cash and Carry, Reliance and mSwipe.

The heydays of India's kirana stores are back.

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About the Author: The post is written by our EZPP Partner Abhirup Roy with relevant edits from our editorial team. Abhirup is a graduate from IIM Ahmedabad and works with Zolo Stays.


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