June 20, 2024
📰 FEATURE STORY
Do small retailers have a viable future in India?
If we’re in the era of instant gratification, then quick commerce (Q-commerce) is primed for success. The business model defined by 10-15 minute deliveries of almost anything you want is driven by Gen Z and millennial consumers. Why step out and head to a store to satiate those snack cravings when it can be done in a few minutes? It’s easy and convenient.
But where does this relatively new model leave small-scale retailers and the neighbourhood kirana or mom-and-pop stores that have been around for decades? As Q-commerce continues to take hold across the country, will these retailers go out of business, or is there a way for them to thrive as well?
Context
There are reports that Flipkart and Amazon plan to enter the Q-commerce space. It’s not hard to understand why the two e-commerce giants want a slice of that pie. The sector has been growing year-on-year at 77% and reached $2.8 billion in gross merchandise value last year. E-commerce, on the other hand, has grown by 14-15% year-on-year.
Over the past few years, companies like Zomato’s Blinkit, Swiggy Instamart, and Zepto have changed the face of e-commerce and retail in India. These platforms have a substantial consumer base growing with the frequency of transactions and higher order values.
Given the country’s burgeoning urban population and rising disposable income, the demand for convenient, on-demand shopping solutions has never been higher.
The interesting thing is that this business model hasn’t exactly worked out well in other countries. Billions of dollars were invested in startups like Gopuff, Gorillas, Zapp, and many others. After a while, some companies either shut down, announced layoffs, or changed strategy. Some analysts said it was an instance of irrational exuberance. India seems to have bucked this trend, for the most part, at least till now.
If we look offline, the Indian retail landscape has changed quite a bit. We’ve gone from small neighbourhood kirana stores to big retail chain outlets to large format hypermarkets. Companies like Reliance and Walmart began to stamp their presence. Then came online shopping and e-commerce with companies like Flipkart, Amazon, and a few others.
As domestic and foreign companies jumped into retail and expanded their presence and portfolios, a question that kept coming up was, what happens to small players?
That question is now being asked again in light of Q-commerces’ evolution and expansion. Can the small players survive as the big guns use their capital to keep expanding in new ways?
VIEW: Premature to write them off
The question of whether kirana and small-scale neighbourhood stores can survive is rhetorical. Their obituaries have been written time and again. Each time, as the retail landscape changed and shifted, they’ve managed to survive. There’s no reason to believe they won’t now. That’s because, in many instances, these stores were the last-mile stockist for some Q-commerce platforms.
What also happened was companies like Hindustan Unilever teaming up with these stores to help them scale and put up a fight against their joint competition – companies like Swiggy, Blinkit, and Zepto. While the modern retail format has changed, kirana stores remain integral to the Indian grocery system landscape. With 35-45% of the over $800 billion retail market devoted to the grocery segment, the small-scale retailers aren’t going anywhere.
In fact, they could thrive a bit more thanks to the Open Network for Digital Commerce (ONDC). This could usher in a new era for mom-and-pop stores. If these stores are going to survive, they likely need to have some digital presence. That’s exactly what ONDC provides. Some small stores have already formed WhatsApp channels to take customer orders. The use of UPI and QR codes have also helped.
COUNTERVIEW: The big guns are out to play
If or rather when Amazon and Flipkart enter the Q-commerce sector, the landscape will see more competition. What these companies have on their side is untapped potential. Q-commerce only occupies about 7% of the market. The market’s potential is projected to be $45 billion, higher than food delivery, per some estimates. While companies in this space aren’t profitable yet, they’re getting there. Zepto and Blinkit are expected to turn a profit in FY2025.
E-commerce and Q-commerce companies face a lot of growing pains. But they have the capital and logistical support needed to turn things around. Some platforms have decided to add higher-priced items to increase the average order value. Some even forayed into non-grocery segments like fashion and electronics. You can order T-shirts or headphones with snacks and groceries in one go.
These platforms also have an additional source of revenue – advertising. Several D2C brands have hopped on board, given the Gen Z and millennial consumer base in the big metros and tier-1 cities. In fact, advertising is about 3% of a platform’s gross merchandise value. That’s something that small-scale and neighbourhood stores struggle with or outright don’t have.
Reference Links:
- The Meteoric Rise of Q-Commerce in India, Estimated to be 3X by 2029 – Indian Retailer
- Flipkart plans foray into Q-commerce – The Financial Express
- The 10-minute challenge: Quick-commerce becomes the villain for neighbourhood kirana stores – The Economic Times
- Can India’s quick commerce revolution be a catalyst for job creation? – The Economic Times
- Q-commerce growth – The Financial Express
- Will Quick Commerce Quell The Kirana Store Culture In India? – Entrepreneur India
- India’s $883 billion retail landscape dominated by kirana stores – Business Today
- 20 Years Since Big Retail Arrived, India’s Kirana Stores Remain Resilient – The Secretariat
What is your opinion on this?
(Only subscribers can participate in polls)
a) Small retailers have a viable future in India.
b) Small retailers don’t have a viable future in India.
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