Crouching tiger is the hidden dragon.

How Kirana stores used novel

sourcing and clever approach to inventory to win.
Kirana stores rule the packaged consumer-goods distribution but are derided as inefficient. They have
used some of these ‘inefficiency’ and some street-fighting ingenuity to keep the supplies of essential
goods flowing. While these positive effects may wane, they surely give the general trade more goodwill,
and perhaps even the bargaining clout.

BY SOUMYA GUPTA, 21 APRIL, 2020

The philosopher Zeno of Elea (490-430 BC) had a penchant for paradoxes. One of them is the
paradox of the Achilles and the tortoise. According to it, if Achilles – the most swift-footed of all
mortals – and a tortoise were to compete in a race, the tortoise would win. Aristotle,
paraphrasing Zeno, said, “In a race, the quickest runner can never overtake the slowest, since the
pursuer must first reach the point whence the pursued started, so that the slower must always
hold a lead.” Mathematically, the paradox has been solved, but on the larger question of
meaning, it is still alive. The tortoise continues to be in the lead.

India is home to at least 12-13 million of these tortoises. You can see them in your
neighborhood. We are talking about the humble Kirana stores. They are usually small (less than
500 sq ft), mostly operating the old khata system and are not digitized. They don’t get access to
credit from the formal financial system and are usually arm-twisted by large consumer
companies to stock products that serve the companies’ needs rather than the stores’ consumers.
Experts across the retail industry have lamented at the inefficiency of the Kirana network and
long for a day of direct-to-consumer delivery as the holy grail of retailing. But these experts may
have to wait a bit longer for that day.

The novel coronavirus has hit Mr. Achilles (online retailers) right in the heel. Their supply chain
has come to a halt. The first reaction of people in every big city was to quickly place orders on
Amazon or BigBasket to avoid visiting stores. Within 24 to 48 hours, all stocks with these online
retailers had been sold. This made ordering on an online portal extremely difficult and getting
delivery of ordered products even more challenging. The following tweet symbolizes it:

1
It should have been a ‘demonetization’ moment for e-commerce businesses that have been
fighting to convince Indians that shopping for grocery and daily essentials online is the future.
And now when a lockdown has forced people to stay home and created the best-possible market
need for home delivery of everything, they have all but collapsed. Everyone knows by now that
the Kirana, for all its inefficiency and sub-scale nature, was why there were no food riots in the
cities. Opening earlier and closing later than usual, these ordinary folks did something
extraordinary. This is the story of how the tortoises got their ducks in a row.

To understand the imperfect, we must first visit the ‘perfect’ – the efficient and lean e-commerce
companies. The e-commerce companies in grocery (and otherwise) run on lean inventories. That
used to be an advantage, because it would keep costs low and operations lean. But that bit them
when supply chain was disrupted overnight. They just didn’t have enough buffer stocks to fulfill
the deluge of orders that hit their websites and apps after the janta curfew of March 22. Second,
India’s consumer trade is still largely dominated by general trade. Relationships between
manufacturers, distributors, and retailers made sure increasingly scarce supplies were allocated
to the more accessible, effective channel. It acted as an amplifier. Third, migrant workers began
to flee cities when it became clear that the lockdown would continue for a long time and job
certainty was on the line. E-commerce companies, that need delivery and warehousing staff to
function, were struggling for manpower.
Gift and family ties

It’s not as if these issues didn’t hit general trade. But kiranas are hedgehogs, and they know
many secrets. Most of the store owners are hardy and survive without any help from the broader
economic system. Consider Ashok Kumar, a 50-year-old, running a small Kirana store in East of
Kailash. Starting his business with a small store, he has now merged two stores and even owns a
godown across the street. Kumar had set up his kirana store in East of Kailash’s residential
complex in 2000 when he was 30.

Hailing from a small village called Rampur in Uttar Pradesh, his father ran a tailoring business in
the same space that today stands as a kirana store. Not a man fit for stitching and designing,
Ashok Kumar wanted to start a business of his own. Right after school, he started his small
puncture shop near Khadar. Failing to make any profits, he learnt about an opportunity of a
salesman at a wholesaler’s store in Khari Baoli, Old Delhi. Married at an early age, he alone had
the responsibility of sustaining a family of five consisting of parents, wife and two sons – at the
age of 25. While his wife took charge of his father’s tailoring business, Kumar started his stint as
a salesman.

“While going from place to place, to sell the items at local shops, I soon learnt how one could
save up a substantial amount by purchasing from wholesale and selling it in retail. This gave me
the idea of opening a kirana store of my own. I had built good connections with wholesalers.”

This skill came in handy when the lockdown hit the national capital. Delhi’s East Kailash
neighborhood is dotted with kirana stores and ‘smart’ kirana-supermarket hybrids that have been
serving these neighborhoods for 30-40 years.

Today, Kumar’s is the only store that is open in the complex. “At the time of lockdown, it is our
store after all that has come forth for the rescue. Had we shut the store fearing loss of business
and income due to those online marketplaces, people would have struggled to manage their
everyday essentials. Only the sturdy ones pass the test of time,” says Kumar.

The complex that Kumar’s store serves is home to scores of elderly folks who depend on routine
deliveries for their needs, even in the best of times. “We have their numbers [elderly households]
saved with us and we still deliver the groceries to them. However, it is not the same as before.
We take the orders in the morning and deliver the items by evening. In this way, we can abide by
the opening hours of the stores as prescribed by the government and provide our service to the
customers,” Kumar says.

What has helped this system work is Kumar’s own family. His sons have been helping deliver
orders to these homes. His son Rajesh takes down orders from elderly customers in the morning.
At a kirana store in Mumbai’s Versova run by a Gujrati man, it is the owner’s family that has
come through. The shop owner’s brother rides in on his scooter and loads up a cardboard box of
20-30 dairy milk chocolates. “There’s no transport available,” he says.
The store owner spoke on condition of anonymity for fear of the authorities. This pin code
(Versova), the epicenter of the outbreak in the city, is now a ‘red zone’ in Mumbai.

“So, I take out my scooter everyday to get to our distributors in Goregaon, Malad, and Kandivali
to bring back whatever I can. Sometimes, I take a rickshaw, if I can get one. Transporters have
increased their daily rates.” While he’s out, his elderly parents manage customers and attend to
phone calls inquiring if a product is in stock. The Gujarati family has been running the shop for
nearly 10 years in this area.

“There is just no labour in the market,” says the owner of a ‘smart’ kirana store in Versova,
requesting anonymity. “People who worked for us were from UP and Bihar. They have either
gone home or trying to go home”.

So, who’s helping out? As he asks me, his elderly father, wearing gloves, a mask, and carrying a
bottle of sanitizer, is handing out packs of Maggie to customers asking for it. Although this store
is built like a hybrid supermarket, with narrow aisles to squeeze through and browse, store
employees are now regulating traffic and handing over items to buyers themselves. “My entire
family is now working at the store. We closed our other outlet in Chembur (a suburb 30km
away). We are a joint family, so we can make it work.”

The middle-aged brothers have begun taking care of getting supplies from wherever possible.
The elder brother also spends time calling suppliers in Vashi APMC wholesale market. “I have
paid in advance for supplies, but they have not come in. It’s been 10 days. I have to take care of
it,” he says. The younger brother is dealing with goods unloading from a smaller tempo at the
store. Meanwhile, their elderly parents manage the counter and ensure that walk-in customers
stay in a line, one meter apart from one another.

Family ties in this business also have an older relationship – one of caste-based community
networks in the baniya community that has traditionally worked as traders in India. Although,
there are no official numbers, this community dominates kirana store ownership, especially in
North and West India (although that is also because of caste privileges). When business, caste
familiarity, and family come together, it can make it easier to tide over a crisis.

99-and-a-half will have to do. For now.

One of the biggest problems after the first few days of the lockdown was the erratic availability
of products from various packaged consumer-goods manufacturers. It is instructional how the
kirana system solved this problem.

Kumar, the owner of the Delhi store quoted above, never had a trouble with managing the stocks.
He keeps everything ready in the warehouse. However, despite the supplies getting disrupted
amidst the lockdown, his demeanor expresses his preparedness to deal with the crisis.
As he speaks, a local distributor unloads packets of pulses in the warehouse.

Pointing towards the stock, Kumar says, “Those are not Tata or Rajdhani dals, but they are good-
quality supplies from old Delhi’s largest and most-trusted wholesale area, Pili Kothi. While we
are not receiving adequate supplies from the company distributor, we re-connected with some of
the old suppliers for the goods. Their pulses are far better than the Tatas’.”

Same is the case with other commodities at his store – atta, rice, salt, and spices. The brands
have been replaced by the local mills and grinders. At his store, Doritos have been replaced by
Diamond chips, in place of Maggi lies ready-to-eat Wai Wai, and for biscuits the choice remains
between Cadbury Oreo, and Parle Monaco. Common essentials such as atta and Ashirwaad Atta
have been replaced by the supplies from a local flourmill in Bhogal, which was once the leading
and prosperous flour mill in South Delhi.

“We are procuring supplies from our years-old network of distributors. The commission remains
very high for certain products, but we are getting the customers all that we can,” he says.

“Local kirana stores and local brands are doing better at surviving,” says Lalit Bhise, founder
and CEO of Mobisy Technologies, which sells technology to consumer companies to streamline
their supply chain. It’s all about flexibility.”

“A local brand can change distribution tactics quickly. For a large brand, onboarding a
distributor is a formal process that can take up to one to two months and a large upfront
investment. But in times of crisis, we are seeing local brands calling up alternate distributors in
hotspot of demand, shipping the quantity they need and can handle, and doing business.”So, if
Maggi is out of stock, the kirana store owner switches to Ching’s Secret (Indian firm Capital
Foods’ instant noodles brand).
Of course, e-commerce firms can also make these replacements, and they have been at it. But in
the early days of the lockdown, smaller stores were slightly faster in some areas. Add to it the
manpower problem – no slots, no deliveries – and you know whose attention the brands will
jostle for.

Parle products, market of the Parle-G biscuits, has also realised the value of kirana stores, despite
the odds they must overcome.

“In this lockdown, general trade is doing best, followed by modern trade and e-commerce,” says
Mayank Shah, category head, Parle Products.

For years, the FMCG companies have wagged the kirana tail. This Camelot, even if it is brief,
the FMCG companies are happy to extend their support to these stores.

You can be my long-lost pal

Grocery e-commerce businesses touted their efficiency over general trade because they could
offer discounts and same-day deliveries. For two reasons: they worked on fewer inventory days,
and an auto-replenishment system. They also have a one-up advantage over kirana stores – an
entire level of distribution. E-commerce companies will often get their goods directly from a
large distributor or even the brand (if it is sufficiently new or small in size).

But what they don’t have are old relationships. Those are life rafts in times of crisis. Ask some of
India’s largest brands.

Amul, India’s largest dairy brand saw demand for its fresh products (packet milk, buttermilk,
curd) increase by nearly 30% in just the first few days of the ongoing lockdown, as people began
to buy more in panic.

“Even now, demand for fresh products is up by 10%-50%,” says R.S. Sodhi, managing director
of GCMMF (Amul). “Our distributors are over-buying [sic] to keep up with the demand.”

Dairy and other fresh products become tricky to store in a lockdown because they must be
supplied everyday (or at least every alternate day). Everyone from distributors to e-commerce
procurement teams get a three to four hour window in the morning to pick up what they need to
sell for the day. To make procurement and sales smooth every 24 hours, everyone needs
adequate manpower and a fully functional cold-storage chain, if working with very large
quantities. E-commerce companies are faltering here.

“E-commerce companies are not able to give 100% service, so they cannot handle more fresh
products beyond a certain limit,” Sodhi explains. If you don’t have enough people to make
deliveries, you cannot stockpile products that need temperature control.
“They prefer dealing with ambient [temperature] products.” These include products like milk
tetra packs – Amul says demand here has risen more than 50% – because they can be stored
longer.

General trade – kirana stores, your local Nagori Dairy or Doodh Bhandar or Paal Kadai, are
winning the game here. These are informal stores, but they are geared to working just this
category, and in much smaller categories.

“We have now realised that general trade is the best way to go [in this crisis],”Sodhi says. It has
even made Amul make some drastic changes in its distribution network.

“Since people are locked inside, sales of ice-creams are down by nearly 90%. We have decided
to begin supplying our daily and all dairy products to our ice-cream distributors.” Just like that, a
new channel opens, for brand for the customer. And an amplifying cycle begins – the brand
trusts general trade more, makes adjustments to serve it better. And then the customer is won
over too.

Thanks to general trade, Amul is keeping up with its March revenue targets despite the
decimation of sales in ice-cream and its institutional channel (hotels, restaurants etc). The brand
was able to serve much of the surge in demand on the back of relationships forged with
distributor and the kirana guy.

No good deed ever goes unpunished. Once the virus scare is gone, people will do the things that
are most convenient to them. One-click purchase, doorstep delivery, and low prices is a difficult
combination to match. Old kirana stories like Kumar’s will need to use the customer connections
created now to stay relevant and few ones will use this surge in sales to invest back in their stores
to become more competitive and do well.

Zeno’s paradox was solved mathematically only with the invention of calculus in the 17 th
century, almost 2,000 years after it was first expressed. The kirana may not be around for as long
as the paradox, but it will survive in the Indian economic system for the foreseeable future.

(Graphics by Mohammad Arshad)