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
As platforms like Udaan, Reliance Jiomart pick up pace and become the choice of many retailers who are adopting the digital ecosystem, there emerge some key benefits! And what’s more important to a business-owner than profit in terms of money and time. High margin, lower prices, time-efficient platforms are the future of kirana digitization in India, as stated by many.
“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 with 8% margin. Now if these new players (Udaan) provide with 10% or 12% margin, it becomes profitable to us”, says Kisore who runs a general store in Ahmedabad for the last 16 years.
“If I have to order almonds, I recently ordered almonds from Jio 20 days back. There was a hike in almond price of 300-400 Rs. I checked that Udaan was quite expensive and Jio was cheaper, so I ordered from Jio. So I checked the prices.”
Cooking oil & sugar, and the difference of just Rs 2 is the tipping point for adoption
Even among fast-moving consumer goods, there are some products that are significantly higher in volume in terms of sales. These often include staples such as oil, flour dal, sugar, etc. Therefore, a lower price, by even Rs 1 or 2 among distributors is a big win for the retailer. With Udaan, this has become a reality, where retailers are enjoying lower prices on these 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 because of which, 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 purchasing with Aashirvaad Atta because at that time they were giving in 295 or 290 and in the market we were getting it for around 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
“Their margin is good, they (Udaan) give us goods at a low price, the company gives credit, even one rupee of difference matters on oil.” – A kirana store owner in Mumbai
Exciting elements added to promotions and discounts that are digital-only!
There comes an interesting added advantage that is often difficult for offline retailers to ignore. 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. Like, 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 got the benefit of the coins which I can earn as a reward by ordering products online through these apps. The other benefit is that I don’t have to go anywhere in order to buy my products. So, these are the two main benefits of using these apps to buy products online.”
The pandemic push! Want to stay in business at any cost
Users of Udaan who have been availing services since before the pandemic realized that this gave them an added first-mover advantage at the time when the traditional supply chain was thoroughly disturbed. On the other hand, for some retailers, the pandemic became the reason for many to try the digital distribution ecosystem and experience it first-hand. There has been no going back since then for most of them.
“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. So, we called the driver and checked with him because we had a time limit during COVID for shop opening timing. So, in this case I used to call the driver and get the order unloaded in my house only.” – Pawan, store owner, Delhi.
He further stated that, “Yes, I had lots of benefits online during covid even if few products were cheaper and some were expensive which I had ordered. The aim was that the customer should get the product.”
The ease of restocking and quick delivery is a game changer
For decades, the shop-owners have relied on the sales beat of the distributor. In that regard, digital and organized distribution systems have proved 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 realize a product is about to go out of stock then I place an order, let us consider mustard oil for example, if I realize the stock is less than I order for 5-6 boxes.” – Jaspal, a kirana store owner in Delhi
“I get less rate by Rs. 1 or Rs. 2 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 for us. Secondly, we get doorstep delivery.” – Sarvesh Shukla, a kirana store owner in Lucknow
Udaan is fulfilling important needs, addressing key gaps, but is the retailer looking for a complete shift?
Retailers have adopted but not switched, still have their eggs in many baskets!
Although a significant shift is seen among retailers where online purchases are playing a large role, there is yet to be a time when Udaan is their “only” means of distribution and becomes a one-stop shop. 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 not one but multiple apps. “I have been using Udaan, shop Kirana and Shikhar, Udaan for the last 1.5 years.”
- Distributor is a long standing relationship that retailers want to maintain, Udaan is 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 an issue of severity. An inability to timely check or return the product can hamper their business. This is one place where distributor relationships trump platforms.
“Products which are delivered sometimes get damaged and those damaged goods are not replaced, wherein old system distributors exchange the products if damaged.” – Kisor, a local store owner in Ahmedabad
“There is a difference 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, damaged product also distributor will take back where as in online we have to check 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 turns out to be damaged, then we can get our money returned for these damaged products within 4-5 months.”
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