Experts suggest that kirana stores are looking for ways to create an online presence amid the rise in competition from the quick commerce sector
The conversation about quick commerce platforms eating the share of kiranas has been going on for a long time. FMCG distributor body All India Consumer Products Distributors Federation (AICPDF) highlighted in its recent report that due to the rapid rise of quick commerce, around 2 lakh kiranas shops have shut down.
The industry body has highlighted that the rapid rise of quick commerce platforms has seen its greatest impact in metropolitan areas. This, in turn, has accounted for 45 per cent of the shutdowns, followed by Tier 1 cities (30 per cent) and Tier 2/3 cities (25 per cent) of kirana stores as per the AICPDF.
Speaking to Outlook Business, Dhairyashil Patil, National President of AICPDF, said, “Quick commerce has been active and aggressive for approximately the last eight months. The effect of quick commerce is primarily felt in metro cities and some Tier 1 cities.”
This comes at a time when Zomato CEO Deepinder Goyal recently said in an interview with the Economic Times that quick commerce platform Blinkit is not eating the shares of kirana stores but of e-commerce platforms. A similar sentiment was echoed by Delhivery cofounder and CEO Sahil Barua.
Meanwhile, Patil highlighted that quick commerce platforms often focus on predatory pricing. This, in turn, harms kiranans. “Currently, online, e-commerce, and quick commerce platforms have fostered a mindset that if a product is sold online, it must be discounted, often heavily. As a result, these companies are offering as much discount as they can to establish a market monopoly,” he added.
Patil mentioned that goods discounted for up to 75–80 per cent are neither realistic nor sustainable for any company, especially with promises of 10-minute delivery.
Agreeing to it,Yashwant Lodha, co-founder of fintech start-up PayNearby, said that predatory pricing is indeed a concern for kirana stores.
“There is a clear realisation among kirana stores that quick commerce is hampering their business. It is not a matter of speculation; this impact is already occurring, and therefore, they need to take action to address it,” said Lodha. Fintech platform PayNearby partners with neighborhood retail stores to enable assisted financial and digital commerce services for local communities.
Meanwhile, the AICPDF has also reached out to the government and voiced concerns about the unprecedented growth of the quick commerce segment. Recently, the association also urged the Competition Commission of India (CCI) to investigate quick commerce platforms over predatory pricing allegations.
Patil said, “We raised concerns about deep discounting, which has persisted from the e-commerce era into quick commerce, emphasising the high expenses associated with establishing infrastructure and logistics, leading to significant cash burn.”
The organisation has reached out to Transport Minister Nitin Gadkari, Health Minister JP Nadda, and the CCI about the same, Patil said. The association has also flagged out the lack of regulations regarding franchise agreements for dark stores, which disadvantage small traders.
With the pertinent threat looming around from the quick commerce space, kirana stores are now opting to go digital. The Covid-19 lockdown significantly changed attitudes, leading to greater acceptance of digital solutions, believes Lodha.
“Kirana stores are increasingly recognising the impact of quick commerce on their business, prompting them to adapt by accepting orders via WhatsApp and phone calls. Many are also exploring ways to establish an online presence, reflecting a desire for digital transformation,” he added.
Additionally, a report by Redseer Strategy Consultants highlights that kirana stores are increasingly adopting the digital infrastructure. The report titled B2B E-Commerce Opportunity in India, released in September this year, highlights that India’s kirana stores, which have traditionally relied on fragmented and inefficient trade models, are increasingly adopting digital solutions to streamline their operations. It further highlights that rural Kirana stores are embracing eB2B platforms for formal credit and enhanced customer service.
India has around 13 million kirana stores. For FMCG companies, these stores are still the backbone with their huge penetrative network in the country. However, the growth of quick commerce companies cannot be overlooked.
Brokerage firm Elara Capital's report released on October 22 says, “Distributors on the ground are unable to recover dues from kirana stores due to the negative impact on kiranas by digital platforms.” It further adds that distributors are not able to receive money on time since kiranas are sitting with high levels of inventory. The report also highlights that the rise of modern trade had minimal impact on kirana stores, as it focused on bulk buying. Kiranas, on the other hand, focused on impulse buyers. However, the growth of quick commerce may pose a greater threat, as it caters to the impulse buying sector. This in turn could potentially draw customers away from Kirana stores.
The crux of quick commerce is based on shorter delivery times. The infrastructure behind it is costly.
For instance, dark stores are being created in Mumbai, each typically covering 2,000 to 3,000 square feet and stocking around 6,000 to 7,000 SKUs, added Patil.
“The logistics expenses associated with facilitating 10-minute deliveries are exceptionally high. Thus, companies are providing deep discounts while heavily investing in infrastructure and logistics,” he said.
Patil also pointed out that most investors in these companies are international. “For instance, Zepto is predominantly funded, with 99 per cent of its stake held by a Singapore-based company, leaving only 1 percent from India. This raises the question of how such a company can be classified as Indian and what right it has to disrupt the entire ecosystem,” he said.
Quick commerce platform Zepto is planning to shift its domicile from Singapore to India. The move is being taken by the company with the intent to be an Indian majority-owned company, as per the Economic Times.
The quick commerce platform is also reportedly planning to loop in family offices associated with Ranjan Pai from the Manipal Group, Ramesh, and Rajeev Juneja from Mankind Pharma to increase its domestic shareholding with well-known investors. Additionally, the board of Zomato also recently approved a proposal to raise Rs 8,500 crore through qualified institutional placement (QIP). The intent behind it, as per the report, is to reduce the shares of foreign institutional investors. Amid the ongoing developments, it becomes pertinent to note how kiranas fare as the quick commerce competition intensifies.