A couple of months ago, representatives of a large FMCG company approached Rajesh Bhanushali, a grocer in suburban Mumbai, with a plan to “;digitise”; his shop. The idea was simple. Bhanushali, 40, would download an app on his smartphone and pay an onboarding fee of Rs 3,500. The company would create a webpage in the kirana store”;s name and neatly catalogue the goods he sells. The FMCG major also offered to route all online purchases that came from the neighbourhood to Bhanushali”;s Shivshakti General Store in Mira Road.”;I told them I will sign up only if it is free. I don”;t want to pay Rs 3,500 just to be online,”; says Bhanushali. “;I have a good list of regular customers who come to me for groceries. These days they connect with me on WhatsApp. I don”;t feel the need to spend money to acquire some online-savvy customers who may not even be needing my services on a long-term basis.”;Bhanushali and people like him are among the hundreds of thousands of shopkeepers that companies are trying to rope in as they try to digitise –; or “;modernise”; –; India”;s 15 million kirana stores. The multi-pronged attempts by these companies to sign up these shop owners have often hit a wall. The claims that tech-enabled solutions would ease business processes and could increase business for the small stores have not found many buyers, say analysts.77696649However, the startups and companies in this space have not given up hope. They say kirana owners are not seeing “;value”; because they are not using tech-enabled solutions that are offered to them. The storekeepers, on their part, view techenabled linkages as something that could threaten their business. The tech enablers are now trying to devise ways to overcome the challenges, given the massive business potential.The retail market in India is worth $972 billion, according EY estimates. Roughly 84% of this is attributed to the unorganised players. Retail sector consultants such as RedSeer and E&Y peg technology adoption among kiranas at a dismal 23%. “;I wouldn”;t say kirana digitisation is not happening at all,”; says Abhishek Chauhan, associate partner at RedSeer Consulting. “;But it is happening at a slower pace. There is significant headroom for growth.”;Ashish Jhina, cofounder of Jumbotail, an online wholesale food & grocery marketplace, has intimate knowledge of the challenges. “;Kirana store owners are the smartest businessmen in the country. They will only use solutions that will increase their revenues or save time, labour or space.”; Jhina”;s company now serves over 25,000 kirana stores. Much like competitors Udaan and Ninjacart, Jumbotail helps kirana stores with their inventories.Most importantly, it cuts two to three layers of middlemen and forms a supply chain link between FMCG companies and staples growers, and kirana stores.Chauhan says when digitisation speeds up in the post-Covid world, kirana stores will not be able to resist tech solutions. “;India is a difficult market, and kirana stores operate on an even more difficult terrain. But changes in customer behaviour, especially online shopping, will force kirana store owners to adopt technology,”; he adds.When that happens, inventory managers such as Jumbotail, Udaan and Ninjacart; fintech players such as Paytm, PhonePe; delivery players such as Zomato, Swiggy; ecommerce majors such as Flipkart, Amazon; digital bookkeepers such as Khatabook and tax service providers such as Cleartax, among others, will benefit a lot. But they are not waiting for consumer behaviour to change.77696654Consultants like RedSeer and E&Y say the “;pain points”; in kirana operations are around inadequate fill rates (percentage of customer demand that is met by immediate stock availability), space constraints (which requires better inventory management), pricing issues, financial operations (which include digital payments and tax filings) and book-keeping (which improves receivables management). “;A lot of startups are trying to solve these problems,”; says Shashak Shwet, a partner at E&Y. “;Many of them tried by making apps that were not user-friendly. These would never be accepted by kirana store owners.”;Companies are working on value propositions that would make sense for a kirana store owner to adopt technology. “;It could be something that gives them better margins or technology that can predict changes in demand for products. Larger kirana stores may see value in automated supply chains,”; he adds.Kirana shop owners between 27 and 35 years are more inclined to use technology, say startups that have gone to the field. Grocers on the other side of 40 and the second- and third-generation owners are extremely reluctant to use technology. “;They won”;t use a product if it does not provide them value,”; says Jhina of Jumbotail. That is why Jumbotail also offers working capital loans to store owners. “;We covert small stores to convenience stores. We do everything –; branding, inventory management and designing shelf patterns.Technology is front and centre of what we do. We also help kiranas to sell online through hyperlocal platforms.”; However, some storekeepers like Baban Baburao Mahajan of Kolhapur see this as an intrusion, a hostile takeover of their business. Mahajan, 72, is highly sceptical of the concept of digitising kirana stores. And he is wary of companies like Amazon and Jumbotail. “;Today”;s distributor will become tomorrow”;s retailer. They will take over my business,”; says the owner of BJ Mahajan General Stores, one of the oldest in Kolhapur. “;If I start doing business the way JioMart tells me to do now, and give them access to my customer base, I”;ll be out of business in one year.”; 77696662Startups offering inventory management and supply chain solutions face maximum resistance from kirana store owners. Grocers do not want to end their time-tested relationship with distributors. Traders like Mahajan prefer using old distributor networks because these deliver goods in small and manageable quantities. “;They also give us more business leads, take back damaged goods or offer replacements and give goods on credit.”;Unorganised retail is heavily creditdriven. Industry estimates say urban kirana stores log 40-;45% sales on credit, while rural shop owners (Tier 2+ towns) book 65-70% of their sales on credit. Repayment cycles range between 7 and 45 days.Dhairyashil Patil, national president of All India Consumer Product Distributors Federation, says distributors”; relationships with kirana merchants are too strong. “;We deliver goods to them whenever they want it. A Jumbotail or Ninjacart will not be able to do all this. They are, at best, clones of businesses that failed earlier.”; Hypermarket chains like Subhiksha, More or Reliance Retail failed because they did not extend goods to customers on credit, he adds.The importance of the “;mohalla kirana”; stores rises as one goes beyond urban hubs. In smaller towns, such momand-pop stores are often the supermarkets that cater to a large population. The father would open the store at 5 am to sell milk, egg and khari biscuits. After 10 am, grocery and vegetables would see brisk sales. Later, he would hand over the shop to his wife as he hops on a Bajaj M80 to get fresh supplies from a nearby market.”;There is no need for technology in such shops,”; says Radheyshyam Maheshwari, who shut down his kirana shop in Bhopal two years ago to start an automobile venture. “;They can”;t afford it. These startups will not offer their solutions for free, no?”;Rising fixed costs, intense competition and wafer-thin margins have already eroded the profitability of most kirana stores. A storekeeper gets 2% margin on branded goods and 7-8% on unbranded goods. “;It is a very challenging business. The margins are so low that even strong businessmen can”;t survive,”; Maheshwari adds.Praveen Khandelwal, secretary general of the Confederation of All India Traders, says startups peddling kirana shop technologies don”;t even understand ground realities. “;In India, the nature of retail trade changes every 50 km. A tailor-made solution for all kirana-related problems may not work. Besides, these startups see kiranas as a target audience for their software solutions. They just want to prop up valuations.”; 77696678 77696681While that may be true for most startups, fintech players point out that most stores across the country have adopted digital payment options. Their preference to pay distributors in cash can also change. “;Kirana merchants preferred cash because they had to pay distributors and suppliers in cash. Digital payment enablers are now trying to solve this problem by tying up with large distributors and suppliers,”; says Narendra Yadav, vice-president, PayTm, which claims to have a clientele of over 60 lakh kirana owners. “;You”;ve to give them cutting edge technology at nominal cost.”;The head of offline business development at PhonePe, Vivek Locheb, says it is important to offer value-added services that will help a kirana store keeper grow his business. “;We have been able to give the merchants a lot of sales leads. Our bookkeeping service helps them collect 50-60% of their receivables before time.”;Another challenge these startups face while servicing kirana stores is technology overlap as service providers offer similar solutions. Product customisation has helped them overcome this challenge to some extent.Digital ledger KhataBook saw its adoption rate go up after its app was localised in 12 regional languages, says Ravish Naresh, CEO. It claims to have cornered over 10 million customers in just 18 months –; of which around 20% are kirana merchants. KhataBook helps kirana merchants keep a proper account book, with higher focus on credit management. The company is now planning to digitise preparation of bills, inventory and even filing of GST.Startups like Near.Store and Shopmatic help kirana stores move online without the hassles of employing web designers to create a portal. “;Ours is a plug “;n”; play system. We also give periodic sales and inventory reports,”; says Ashish Kumar, founder of Near.Store.All said and done, merchants are quick to open doors to startups that can increase their turnover. Digital payment enablers have partnered kiranas to give ATM services, and ecommerce companies for hyperlocal deliveries. Mobility service providers like Bounce and Rapido have tied up with kirana stores for bike-docking and battery-recharging services. These services help kirana merchants earn Rs 3,000-20,000 per month. “;You show them value and they”;ll join you,”; says Bharath Devanathan, senior VP at Bounce, which gives bikes on hire.But the lure of more money alone won”;t get all merchants to join the bandwagon. “;I don”;t have time to engage with people who come to me with useless business ideas,”; says Bhanushali, the grocer in suburban Mumbai. “;I am at the counter from 8 am to 10 pm, attending to hundreds of customers every day. I don”;t have the time to grow somebody else”;s business.”;

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