Is kirana digitisation a bigger opportunity than e-commerce?
Manu Bhatia Jaswal
Storyteller & Community Architect @ SprintStudioAI
An in-house research by Sprint Studio AI to understand the perspectives of kirana shop-owners on adopting digital platforms (Udaan, Jio Mart, etc.) unlocked interesting insights about current motivations, benefits, challenges and more!
Margin matters and difference is significant
Platforms like Udaan, Reliance Jiomart, etc. are picking up pace and becoming the choice of many retailers who are adopting the digital ecosystem as many benefits have emerged – high margins, lower prices, and time-efficiency. And what’s more important to a business-owner than profit in terms of money and time.
“Udaan is profitable and even time saving, even if 2% or 3% extra margin is provided, it is a benefit. Earlier (we) used to buy from Unilever at 8% margin. Now, if these new players (Udaan) provide 10% or 12% margin, it becomes profitable for us”, says Kisore, who owns a general store in Ahmedabad for the last 16 years.
“I ordered almonds from Jio 20 days back. There was a hike in almond price by 300-400 rupees. I checked that Udaan was quite expensive and Jio was cheaper, so I ordered from Jio. So, I check the prices (before ordering).”
For high-volume staples, the difference of Rs 2 acts as a ‘tipping point’
Across retailers, we found that staples such as oil, flour, pulses, sugar, etc. are guiding this shift towards the digital ecosystem. And, why not? It makes perfect sense that for high volume purchases, a lower price, by even Rs 1 or 2 is a big win for the retailer. With digital kirana platforms, this has become a reality. Retailers are enjoying lower prices on fast moving and high-volume consumer goods.
“There were no delivery charges. They were also giving products on credit. They were giving all the benefits, so we thought of trying it once. There was a major difference in a few items. For example, Aashirvaad atta had a major difference in terms of price at that time. I began with purchasing Aashirvaad atta because at that time they were selling at Rs 295 or 290 and in the market we were getting it for around Rs 300 or 310. It matters a lot to have a difference of 10-15 rupees on a 10 kg bag in the market.”– Jaspal, a kirana store owner in Delhi.
Exciting features added to promotions and discounts that are digital-only!
There comes an interesting added advantage that is often difficult for offline sellers to match. The concept of cash-back and refunds in the form of “points”, etc. is emerging to be a popular engagement strategy among digital sellers. Udaan is also effectively exploiting this opportunity.
“In the Udaan app, I can collect coins for every payment that I make through this app. For example, I can collect 50 coins for a payment of 50 rupees and 100 coins for a payment of 100 rupees. If I am ordering 5000 rupees worth of products and I am using 50 coins at the time of billing, then 50 rupees will be deducted from my total billing.” – Ayush, a kirana store owner in Lucknow.
“I earn rewards by ordering products through these apps. The other benefit is that I don’t have to go anywhere to buy products. So, these are the two main benefits of using these apps and buying products online.” – A kirana store owner in Delhi.
The pandemic push! Retailers want to stay in business at any cost
The retailers who have been using Udaan before the pandemic realised that they had an unintended first-mover advantage at the time when the traditional supply chain was severely disturbed. And for many, the pandemic became the reason to try the digital distribution ecosystem and experience it first-hand. There has been no going back since then for most retailers.
“Yes, we got this benefit because we could buy the stock any time from them. I have downloaded the Udaan app, they get our number and I get the driver’s number and his information that he is getting my stock. During COVID, we called the driver and checked with him because we had a time limit on keeping the shop open. So, I used to call the driver and get the order unloaded in my house.” – Pawan, store owner, Delhi.
He further stated that, “Yes, I had lots of benefits online during COVID. Even if a few products were cheaper and some were expensive, the aim was to ensure that the customer gets the product.”
The ease of restocking and quick delivery is a game changer
For decades, shop-owners have relied on the sales beat of the distributor. In that regard, digital and organised distribution systems are seen to be game changers. With delivery as quick as 24 hours and nominal delivery changes, Udaan has made life easy for retailers who can restock anytime and anywhere.
“First thing is that I get delivery the next day, I never go out of stock. When I realise a product is about to go out of stock, I place an order. Let us consider mustard oil for example, if I realise the stock is less, then I order 5-6 boxes.” – Jaspal, a kirana store owner in Delhi.
“The rate is less by Rs. 1 or Rs. 2 as compared to the market. If I am a wholesaler and I have to buy stock in wholesale, a discount of Rs. 2 is also a very big thing. Secondly, we get doorstep delivery.” – Sarvesh Shukla, a kirana store owner in Lucknow
Platforms are fulfilling important needs, addressing key gaps, but is the retailer looking for a complete shift?
Retailers have adopted but not switched, and still have eggs in many baskets!
Although a significant shift is seen among retailers where online purchases are playing a large role, this isn’t becoming their one-stop shop yet. This is true for many reasons:
- Udaan does not have all the products that a retailer may need, primarily local brands that are in high demand.
- They use multiple apps, hence, loyalties are not built. “I have been using Udaan, Shop Kirana and Shikhar for the last 1.5 years”, says a store owner.
- The retailer wants to maintain their longstanding relationship with the distributor. Currently, the digital stores are seen as transactional, hence, there is a long way to go.
Risks related to defects and refunds emerged
A serious gap has emerged with respect to refund of defective or expired products. For a retailer, that is a big issue. The inability to timely check or return the product can hamper their business. This is a significant place where distributor relationships trump digital platforms.
“Products which are delivered sometimes get damaged and those damaged goods are not replaced, whereas, the distributors exchange the products, if damaged.” – Kisor, a local store owner in Ahmedabad.
“If we place an order with the distributor, he will take back the expired product but the same expired products are not taken back when we order online. The distributor also takes back damaged products whereas, we have to check the products bought online then and there and give back the damaged items.”
“I am talking about the products which are bought from the distributors. If any of these products turn out to be damaged, then we can get our money returned for these damaged products within 4-5 months.”
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