By Pradeep S. Mehta and Sidharth Narayan, CUTS International
The government of India has been keen to integrate the local Kirana stores within the e-commerce ecosystem. Talks on it had been ongoing between Ministry of Commerce, Department for Promotion of Industry and Internal Trade (DPIIT), Confederation of All India Traders (CAIT), and e-commerce service providers.
These were met with resistance by CAIT, owing to several concerns pertaining to deep discounting, and inventory led models of e-commerce platforms. However, the lockdown imposed on account of the Covid-19 pandemic is changing perceptions and imperatives, for all stakeholders. In view of the social distancing culture creeping in, which is likely to stay for long, e-commerce appears to be the way forward for consumers’ safe shopping.
Undoubtedly, the 12 million strong Kirana stores of India, offer ubiquitous and fast delivery of goods across the length and breadth of the country. This network cannot be matched by any of the large retail giants. While CAIT is willing to work with large Indian retailers, to enhance the income and growth of Kirana stores, it has been sceptical in working with foreign e-commerce majors. This is rather odd, and certainly driven by vested interests. Most of the small retailers follow a herd mentality.
Notable reasons of dissent include e-commerce players engaging in B2C business models, which they argue is in violation of the Foreign Direct Investment (FDI) Rules as contained in the Press Note-2 of 2018. This was clarified that foreign e-commerce companies can only work as platforms and not manufacturer-sellers. The other bigger reason is price competition, not gouging. They complain about deep discounts offered by such players, especially during festive sales, which hurt the business of smaller offline stores, who cannot match the prices.
This has prompted CAIT along with DPIIT to launch their own e-commerce platform, which envisages to on board ~70 million traders across the country. Kicking off with essentials during the pandemic, the platform will expand to other goods post the lockdown. It is an ambitious programme and difficult to even have substantial penetration.
Notably, Walmart owned Flipkart has managed to onboard 27,000 Kirana stores across 700 cities, to cater to the needs of its 160 million consumers. In parallel, Amazon has also partnered with over 20,000 Kirana stores, under their ‘I have space program’, using them for storing and delivering goods, somewhat like C&F agents.
Not only foreign businesses, but large Indian conglomerates are also looking to tap the lucrative network of Kirana stores. Reliance’s Retail business, and its telecom arm, Jio, have come together as JioMart, providing digital terminals to offline shopkeepers, for inventory management and stock ordering from Reliance’s network of wholesalers.
Recognising its potential for growth, Facebook has recently invested $5.7 billion for a 9.99% stake in Jio Platforms. The entity envisages to onboard 30 million small Kirana stores on its digital platform, thereby enhancing their revenues, generating employment, and also resulting in consumer benefit with faster delivery of goods.
However, such promising numbers are still at a nascent stage. E-commerce sales were estimated at a mere $2.5 billion, of the total $550 billion sale of food and groceries in India in 2019-20. Call it lack of reach, or lack of uptake, but e-commerce service providers are no match for the neighbourhood Kirana stores and Indian retail chains at present. This trend is also being witnessed during the Covid-19 lockdown.
Minutes after the lockdown was announced on 24th March, queues emerged outside Kirana stores for procuring essential supplies. This perhaps signified the trust and reliance on Kirana stores, and wariness towards delivery chains of e-commerce service providers, in times of crisis. This proved to be for a good reason. Many obstacles were faced by delivery personnel of e-commerce service providers, especially in the first few days of the lockdown, affecting last mile deliveries of essential supplies. The situation gradually improved over a period of time.
Surveys conducted by different websites, during the first week of the lockdown, corroborate that after experiencing a few initial hiccups, e-commerce service providers started restoring their broken supply chains, and executing orders for essential supplies.
However, as fears of contracting coronavirus mounted, and the lockdown restricted the number of walk-in consumers, e-commerce started to gain prominence. Platforms such as Instamojo, and Shopmatic, which help offline stores in pursuing online sales channels, introduced an “essentials” service category on their platforms, allowing consumers within a radius of three kms to place online orders.
The move saw a positive uptake by Kirana and other offline stores, given the imperative of making such transitions in times of social distancing, and consumers wanting a safe shopping experience from their homes. Similar initiatives can also be seen in other countries, by different service providers.
Not just small Kirana stores, but even large retail chains are developing online channels, amidst the lockdown being extended till 3rd May. A notable example is of Big Bazaar, which has operationalised its website in a gush, allowing consumers to place orders through it. It is also executing orders received by Amazon.
Apart from the regulatory scepticism of CAIT, reports suggest that individual Kirana stores are also reluctant in joining the partnership bandwagon. Reasons include: lack of credit from bigger retailers, possible hassles in facilitating return of goods, breaks in existing supply chains, space constraints for storing additional inventory, envisaged limitations in availability of tailored products for particular geographies, digital illiteracy etc.
Notably, recognising that a one size fits all approach may not work in developing supply chains in different countries or even cities, companies such as Walmart have adopted multiple ways of integrating neighbourhood stores in their delivery networks, across the world.
Example: partnering with one-hour grocery delivery service providers, who buy and deliver products to consumers, from their partner stores in Toronto; and allowing consumers to pick up their orders from multiple convenience store locations in Chile, Canada and Mexico. Similarly, Amazon allows consumers in Japan to pick up their orders from a local Konbini (convenience store in Japanese).
For the Ecommerce-Kirana partnership model to be a success in India, during the lockdown period and beyond, there are a few pressing immediate steps to be taken. The government must formulate a forward-looking E-commerce Policy which recognises the importance of integrating Kirana stores within the e-commerce ecosystem, provide a level playing field between domestic and foreign e-commerce service providers through impartial regulations, and invest in creating the requisite infrastructure needed for propelling the Ecommerce-Kirana partnership model.
Also, service providers must undertake awareness generation and capacity building initiatives for building trust and accelerating the uptake of digital platforms by Kirana stores and consumers. Collaborations with civil society organisations and consumer groups, may be encouraged in this regard. Lastly, large e-commerce service providers must also be sympathetic towards the interests of smaller brick and mortar shops, and allay concerns of CAIT, through responsible business practices.
(The authors work for CUTS International, a global public policy research and advocacy group. Views expressed are their own and not of ETtech)