Indian Retail Market
The Indian Retail market is the 5th largest in the world and slated to be the 3rd largest by 2025. It is expected to grow from $790 billion in 2019 to $1385 billion by 2023. This sector is critical to the Indian economy accounting for 10% of India’s GDP and 8% of employment.
There are two broad types of retail:
- Value based (low margin-high volume) – e.g. Food & Groceries (F&G)
- Lifestyle (high margin-low volume) – apparel, furniture, etc.
The type plays a major role in marketing strategy and sales channels. Lifestyle items tend to be aspirational and attract brand names, are typically sold through large and well-designed stores, and marketing focus is on the middle class or premium segment.
Value Based Retail
The accompanying figure shows the revenue split across different retail categories. Food & Groceries (F&G) dominates with 2/3rd of the market. F&G items, especially the daily necessities and perishables like fruits and vegetables, are high volume and low cost. Every household is a customer. For generations, this market has been served by small local stores and stall/cart vendors. There are 12+ million of them entrenched in virtually every neighborhood in India, 95% of them with less than 500 square feet of floor space.
Most localities in India tend to be a mixture of residences, offices and small shops. This makes it very convenient to shop from these stores. As the figure indicates, 96.3% of the F&G sales is in unorganized retail through these small stores. In comparison, it is less than 20% in Western markets. Though online stores are trying to muscle into this market and are growing at 20% on a small base, unorganized retail sales too are slated to increase at 10% and retain 92.1% of the market by 2023.
In summary, the small stores are here to stay. In fact, they have amply proved their resilience in the current Covid-19 crisis. There is a growing sentiment amongst educated consumers that they must support their local commerce ecosystem. A recent survey shows that 72% of Indians want to buy from local stores after experiencing their tremendous resilience and service during the lock down! Ever since the Prime Minister announced the slogan #VocalAboutLocal, virtually every company in retail is scrambling to adopt it and position itself as a savior of the local unorganized sector!
Challenges facing local stores
Consumers love their local kiranas for their proximity, flexibility, quality of goods and informality of transactions. Buyers rely on recommendations by the store staff and ask them to get certain items they may want. The kiranas may offer conveniences like local delivery and a credit facility (‘khata’) to be settled every month.
Instead of visiting the shop for pickup, consumers often call the vendor with a list of items. With smart phones becoming common place even with veggie/fruit sellers on carts, some buyers have graduated to messaging their items over Whats app. While more convenient, people are finding that they can be time consuming and error prone. Orders may get misinterpreted, there can be many messages relating to the same order, and vendors have a hard time keeping track of requests from multiple customers. It becomes difficult to manage the workflow of order, packing, payment and delivery/pickup. The user too must send the order to a specific store and has no visibility into order fulfillment and status.
Many buyers, especially in well to do urban areas, are shifting to online shopping apps and buying from large supermarkets. They are attracted by the special offers and discounts on offer, made possible with bulk purchases by supermarkets and the VC money funding shopping apps. Loyalty points and online ads encourage buyers to keep coming back.
Local stores find it difficult to compete. They are getting left behind in the digital transformation that is changing the world, and often lack the skills and money to adopt technology solutions. But there is new hope for them with the sentiment of #VocalAboutLocal and a wave of startups with apps specifically for small stores.
Competition to the Kirana
The competition is mostly in three categories: large supermarkets like D-Mart, online stores with delivery and backend supply chain like Big Basket, and shopping apps doing delivery like Dunzo.
They have their share of problems. Supermarket shopping takes time and is possible for most only on weekends. They can be very crowded especially at the checkout counters, and parking is hard to get.
Users find it painful to order their daily necessities from online shopping apps. Unlike when you buy lifestyle items on Amazon or Flipkart, grocery shopping from a store catalog is not convenient when you already know what you want to buy. The apps may not show your favorite brand and the unbranded stuff that you can get at local kirana isn’t even listed. Delivery timing is unpredictable, and the delivery person often calls multiple times asking for directions. The quality of groceries is not as good, and the packaging is a nuisance. Lastly, refunds and changes to the order are not as flexible as with your local kirana.
Finally, there is the recent entry of mega players who are investing massively to capture a large share of the market. Like JioMart and Amazon. Their strategy appears to be to become the stores’ backend supplier from their physical stores like Reliance Fresh or supply chains. They are co-opting kirana stores on their platform with the intent to route orders to them. However, in this model, they will hijack the buyers to their platform and retain them by offering loyalty points, discounts etc. Vendors will lose control since items and brands and pricing will be controlled by the mega-players, and potentially the flexibility to source from other distributors.
Startups with solutions for the kiranas
There are several players offering solutions for stores. These fall into the broad categories as noted below with a few examples:
- Connecting Local stores to brands and wholesalers
- Peel-Works, ShopX, ShopKirana, Grofers
- Store Management
- Catalog Management, Inventory: Store King, Snapbizz
- Self-checkout, Sales and Revenue Tracking: Metro Cash and Carry, Khata Book
- Orders, Delivery
- Swiggy, many city specific delivery apps
- Loyalty programs
- Nearbuy, ShopClues
- Credit (‘khata’) management
- Khatabook, OKcredit
- Help shop come online
- Shopify, Ecwid
These apps are useful for large stores that have the resources to adopt technology for improving their operations and supply chain. However, what most of the stores need the most is online presence so that they are visible to buyers in their locality and can service their orders.
How GullyBuy is bringing stores online
At GullyBuy, we have built a digital marketplace solution to bring local stores online without forcing a major change in how they operate. It is a kirana-friendly solution that lets them get started easily with basic capabilities and adopt the more powerful features at their own pace to compete more effectively with modern retail and online stores.
The following points highlight our key differentiators.
GullyBuy is the ONLY company with mobile apps that DIRECTLY connect consumers to their local and city-wide stores, cart/stall vendors and home entrepreneurs with absolutely No Cost.
GullyBuy is the ONLY solution that EMPOWERS vendors to decide their own policies (discounts, special offers, pricing) and adoption of features (catalog, visibility range, ads), unlike those big online players whose real aim to hijack their business and flexibility.
GullyBuy is the ONLY app that lets consumers select their preferred local and other stores, place their order and pay the store DIRECTLY.
About GullyBuy Software :
GullyBuy Software is a bootstrap start-up founded in November 2019 by a team of veteran serial entrepreneurs, each with 25+ years of technology and business experience.
The GullyBuy vision is to ‘Simplify Shopping, Simplify Life’ through a digital marketplace platform that directly connects buyers and local and specialty stores across India.
Our mobile apps for consumers and vendors enable buyers to order groceries, daily essentials and much more from nearby stores, city-wide specialty stores, cart/stall vendors and home entrepreneurs. GullyBuy leverages the unique characteristics of day to day shopping from local stores (convenience, trust, delivery, credit) while improving customer service, efficiency, store discover ability and profit margin.
GullyBuy is a technology solution with an asset-light business model, and not an e-commerce platform. It is designed for viral scale by retaining the informality that exists between consumers and their preferred stores while shopping for daily necessities.