Kirana Stores are Closing Down, but are Consumers Complaining?

Food tech major Swiggy has joined its rival Zomato as a listed entity on the stock exchanges. It is a huge milestone for the company and its shareholders, more so for the Indian startup economy. Once derided as an ecosystem full of speculative cash-burning ‘bubbles’ waiting to burst, the past decade has seen the first batch of India’s internet startups prove detractors wrong and how! Today, public money respects the considerable maturing these businesses have witnessed over the years.

Convenience at the Doorstep

In the latter half of FY21, even as the first wave of the pandemic had begun to wane, and with food delivery returning to pre-Covid levels, there was growing realisation that scaling the food delivery vertical alone would lead to diminishing returns—the demand from metros would plateau as competition with big fast-food chains and their direct-order apps would intensify, while scaling in Tier-II and III cities would be tougher to crack. More verticals needed to be added to supplement the food delivery business.

A loss-making, starved of private cash and hence IPO-bound Zomato acquired Blinkit in January 2022 to add quick commerce to its arsenal. Swiggy’s Instamart, Zepto and Dunzo [quick commerce services] properly jumped onto the 10-minute delivery bandwagon the same year. Three years later, quick commerce is another ‘bubble’ that hasn’t burst! In fact, it is powering both Swiggy’s and Zomato’s growth into the future, with customers warming up to the service in large numbers, leading to a somewhat paradoxical status quo—the average middle-class Indian consumer today is better-serviced in groceries and essentials than similar customers in the West. The march of innovation has made India the Vishwaguru in delivering convenience to one’s doorstep in minutes via the internet. It is genuinely something to be proud of. But the detractors won’t have it!

The All India Consumer Products Distributors Federation (AICPDF), an association representing retailers and distributors, has in a recent report and several press interviews, accused quick commerce companies of predatory pricing and driving traditional retail into the abyss. The reality, as always, is more nuanced and reflective of the inherent proclivities of lobbyists and regulators. Lobbyists, for one, always seek to protect jobs, no matter how few, and devoid of productivity they may be. The AICPDF has been repeating a figure to various news outlets—two lakh kirana stores have apparently shut shop in the past year because of unfair competition with quick commerce companies. But is their closure solely attributable to ‘predatory pricing’ by Blinkit, Zepto, et al.?

Or have mom-and-pop stores stopped being useful for the modern-day consumer? A few years ago, I discovered that I might be lactose intolerant. So, I went to my neighbourhood market to look for vegan milk options. None of the stores had any! When I asked if they carried almond milk, they handed me Amul’s badam milk (a dairy smoothie). This is not to poke fun at a well-meaning shopkeeper’s lack of familiarity with vegan milk. However, three years later, there is still no vegan milk in my neighbourhood’s kirana stores. Zepto, on the other hand, offers several vegan milk options. The same is the case with atta for diabetics and other healthier alternatives to everyday items. Consumers know these options exist and are open to trying out different brands. Retailers, though, continue to ignore this demand and are unwilling to place a bet on anything that is new.

Upending the Old

The retailers’ association would have me believe that my preference for 10-minute delivery (read laziness) is driving the humble kirana store out of business. If that is so, is it necessarily a bad thing? The kirana store employs just 2-3 workers on an irregular basis and is not run very efficiently—it still does not stock any vegan milk and a host of other products I’d like to purchase—all the while occupying prime real estate.

In contrast, the average Blinkit dark store peaks at around 1,500 orders per day on a weekday, leverages data and a good amount of inventiveness to stock products that are, or can grow in demand, whilst keeping 10–30 workers inside the dark store and 40–60 delivery workers highly productive through the day. It’s a kirana store on steroids—more efficient and, hence, more successful. If the dark store is indeed driving the kirana store out of business, it means it is generating more revenue, which is net-net good for the many people who derive their livelihoods from enabling 10–minute deliveries, as opposed to the very, very few who keep a kirana store functioning.

A visit to the kirana store often ends with settling for the second-best item or being asked to return the next day until the product of choice is restocked. Customers’ preferences are given short shrift and smaller, newer manufacturers stand little chance to compete on the shelves against established brands. Kiranas were the original monopoly—family-run, rigid in their ways and hostile to innovation. The space was crying out for a disruption.

Quick commerce entrepreneurs saw the opportunity and built data-backed systems that have become really good at predicting customer behaviour. At the same time, the online marketplace approach has allowed for the discovery of newer brands and products. It’s textbook innovation! The kirana champions are being too nostalgic for an earlier era of monopolistic inefficiency. There’s another test we can apply here—think of all the wonderful brands people have discovered through Shark Tank India. Now imagine these startups trying to build themselves in a pre-Covid, pre-quick commerce era. Would their products stand a chance of being stocked in the friendly neighbourhood kirana store, whose owner would have filled their shelves by cutting deals with the distributors of fast-moving consumer goods (FMCG) behemoths? Probably not.

Innovation, when it hits the bullseye, doesn’t play nice with the old and obsolete. Lobbyists resisting the march of innovation are doing a great disservice to the lakhs of people who stand to benefit from the value that will be generated by innovators. Allegations of predatory pricing have been thrown around far too liberally against new-age companies, which are creating value at the expense of actors entrenched in the political economy. Political compulsions, in turn, compel antitrust regulators to take up these complaints and stymie innovation. Politically powerful lobbyists and politically compelled regulators will never like innovators. Thankfully, we know the ones we need more of. Bubbles will burst if they must, on their own, but we must not be the ones to burst them. The good ones will go public at some point.

The writer is a journalist and social and political affairs commentator. Views expressed are personal.