Kirana Stores May Be Closing Down. But Are Consumers Complaining?
The kirana champions are being too nostalgic for an earlier era of monopolistic inefficiency.
This article first appeared in Outlook Business.
Alternative headline: Kiranas Were The OG Monopoly; They Had It Coming
Foodtech major Swiggy has joined its rival Zomato as a listed entity on the stock exchanges. It’s a huge milestone for the company and its shareholders, more so for the Indian startup economy. Once derided as an ecosystem full of speculative cash-burning ‘bubbles’ waiting to burst, the past decade has seen the first batch of India’s internet startups prove detractors wrong and how! Today, public money respects the considerable maturing these businesses have witnessed over the years.
In the latter half of FY21, even as the first wave of the pandemic had begun to wane, with food delivery returning to pre-Covid levels, there was a growing realisation that scaling the food delivery vertical alone would lead to diminishing returns – the demand from the metros would plateau as competition with big fast-food chains and their direct-order apps would intensify, while scaling in tier-2/3 cities would be a tougher nut to crack. More verticals needed to be added to supplement the food delivery business. A loss-making, starved of private cash and hence IPO-bound Zomato acquired Blinkit in January 2022 to add quick commerce to its arsenal. Swiggy’s Instamart, Zepto and Dunzo properly jumped onto the 10-minute delivery bandwagon that year. Three years later, quick commerce is another ‘bubble’ that hasn’t burst! In fact, it is powering both Swiggy’s and Zomato’s growth into the future, with customers warming up to the service in droves, leading to a somewhat paradoxical status quo – the average middle-class Indian consumer today is better-serviced on groceries and essentials than similar customers in the West. The march of innovation has made India the Vishwaguru in delivering convenience to your doorstep in minutes via the internet. It’s genuinely something to be proud of. But the detractors won’t have it!
The All India Consumer Products Distributors Federation (AICPDF), an association representing retailers and distributors, has in a recent report and several press interviews, accused quick commerce companies of predatory pricing and driving traditional retail into the abyss. The reality, as always, is more nuanced and reflective of the inherent proclivities of lobbyists and regulators. Lobbyists, for one, always seek to protect jobs, no matter how few, and devoid of productivity they may be. The AICPDF has been repeating a figure to various news outlets - 2 lakh kirana stores have apparently shut shop in the past year because of unfair competition with quick commerce companies. But is their closure solely attributable to “predatory pricing” by Blinkit, Zepto, et al.? Perhaps mom-and-pop stores stopped being useful enough for the modern-day consumer? A few years back, I discovered that I might be lactose intolerant. So, I went to my neighbourhood market to look for good vegan milk options. None of the stores had any! When I asked if they had almond milk, they handed me Amul’s badam milk (a dairy smoothie). This is not to poke fun at a well-meaning shopkeeper’s lack of familiarity with vegan milk. However, three years later, there’s still no vegan milk in my neighbourhood's kirana stores. Zepto, on the other hand, offers several vegan milk options. The same is the case with atta for diabetics and other healthier alternatives to everyday items. Consumers know these options exist and are open to trying out different brands. Retailers, though, continue to ignore this demand and are unwilling to place a bet on anything that’s new.
The retailers’ association would have me believe that my preference for 10-minute delivery (read laziness) is driving the humble kirana store out of business. If that is so, is it necessarily a bad thing? The kirana store employs just 2-3 workers on an irregular basis and isn’t run very efficiently – it still doesn’t stock any vegan milk and a host of other products I’d like to purchase – all the while occupying prime real estate. In contrast, the average Blinkit dark store peaks at around 1,5000 orders per day on a weekday, leverages data and a good amount of inventiveness to stock products that are, or can grow in demand, whilst keeping 10-30 workers inside the dark store and 40-60 delivery workers highly productive through the day. It’s a kirana store on steroids – more efficient and, hence, more successful. If the dark store is indeed driving the kirana store out of business, it means it’s generating more revenue, which is net-net good for the many people who earn their livelihoods from enabling 10-minute deliveries, as opposed to the very, very few who keep a kirana store functioning.
A visit to the kirana store would often end with settling for the second-best item or being asked to return the next day until your product of choice got restocked. Customers’ preferences were given short shrift, and smaller, newer manufacturers stood little chance to compete on the shelves against established brands. Kiranas were the OG monopoly – family-run, rigid in their ways, and hostile to innovation. The space was crying out for a disruption.
Quick commerce entrepreneurs saw the opportunity and built data-backed systems that have gotten really good at predicting customer behaviour. At the same time, the online marketplace approach has allowed for the discovery of newer brands and products. It’s textbook innovation! The kirana champions are being too nostalgic for an earlier era of monopolistic inefficiency. There’s another test we can apply here – think about all the wonderful brands you’ve found out about through Shark Tank India. Now imagine these startups trying to build in a pre-Covid, pre-quick commerce era. Would their products stand a chance of getting stocked in your friendly neighbourhood kirana store, whose owner would have clogged their shelves to the hilt by cutting deals with the distributors of entrenched FMCG behemoths? Probably not.
Innovation, when it hits the bullseye, doesn’t play nice with anything old and obsolete. Lobbyists resisting the march of innovation are doing a great disservice to lakhs of people who stand to benefit from the value that will be generated by innovators. Allegations of predatory pricing have been thrown around far too liberally against new-age companies, which are creating value at the expense of actors entrenched in the political economy. Political compulsions, in turn, compel antitrust regulators to take up these complaints and stymie innovation. Politically powerful lobbyists and politically compelled regulators will never like innovators. Thankfully, we know the ones we need more of. Bubbles will burst if they must, on their own! We must not get antsy and start pricking them. The good ones will survive the tough times, ignore the lobbyists, and go public at some point.