Almost 1.27 crore kirana stores dot the grocery retail landscape in India, comprising nearly 90% of the retail sector (United States Department of Agriculture [USDA] 2021). Despite their unique benefits, these neighbourhood convenience stores have been on the decline in recent years due to tough competition from e-commerce and the organised retail sectors.
It is estimated that the share of kiranas in the grocery retail space will shrink to 70% over the next few years (McKinsey 2022) as consumers get used to the discounts, variety and shopping convenience offered by alternative grocery retailers.
Marred by operational inefficiencies, kirana stores are unable to provide attractive deals, variety and online shopping options to their consumers. Kirana retailers are thus placed at a serious disadvantage vis-a-vis other modern retailers. Digitising key operations such as procurement, inventory management and bookkeeping can help solve some of the operational challenges and boost incomes (Accenture 2020). Further, kiranas can create a digital storefront or list their products on aggregator platforms to build an online presence and enlarge their catchment area. Although emerging business-to-business (B2B) service providers are offering piecemeal digitisation services to kiranas, only 15,000 of these hyperlocal stores have adopted digitisation so far (Observer Research Foundation [ORF] 2021).
The slow uptake is a result of the barriers to digitisation, which the existing kirana-tech solutions have failed to address. These barriers include platform lock-in, duplication of onboarding costs, inadequate access to allied services and limited end-user traction. In addition, behavioural factors such as a trust deficit and a rigid mindset have discouraged kiranas from integrating into the online grocery retail ecosystem.
The ambitious Open Network for Digital Commerce (ONDC) initiative offers an innovative strategy to accelerate digital transformation for kirana stores, by enabling their phytical (physical and digital) presence. The ONDC can be instrumental in integrating kiranas into the formal e-retail ecosystem through its open protocol-enabled architecture. We propose that the ONDC, through its network-centric approach can resolve key pain points for kiranas, including platform lock-in, duplication of platform onboarding efforts, trust deficit, discoverability and access to value chain partners.
The ONDC’s technical architecture needs to be complemented with philanthropic support to deliver digitisation benefits to kirana stores. Philanthropic initiatives have a vital role in gathering input and leveraging evidence for the effective and equitable implementation of ONDC, thereby demonstrating its true potential. Community engagement, product innovation and ecosystem enablement should be the priority areas for philanthropic investments, to achieve the intended last-mile impact of the ONDC.
Authors: Abhishek Modi and Parul Gupta