Small kiosks called mom-and-pop shops are a staple of a local retail economy. In India, they are called Kirana stores and these shops are in for the tryst with Reliance.
These Kirana stores account for the vast majority of India’s retail market, with 11m shops it constitutes 85% of India’s fragmented retail market. Estimates say that it is the fifth biggest in the world.
Recently they were visited by salesmen from Reliance’s JioMart with steep discounts.
Reliance under Ambani has become one of the largest conglomerates in India, which stretches from telecom and energy to retail, making him the richest man in Asia. He has expanded the company’s retail unit, which comprises thousands of stores.
This expansion includes the company’s production lines and e-commerce unit. Now they are moving into the Kirana sector. It will undermine the retail and distribution system that existed for decades.
This, is bad for Udaan, India’s first business-to-business online platform to supply Kiranas. Another group that will face the worst consequences are 4,50,000 distributors that represent fast-moving consumer goods.
They supply goods from many consumer goods companies such as Hindustan Unilever and Nestlé. These distributors and salesmen are traditional replenishers of these stores, who visit these stores weekly for this purpose.
That would change the entire fraternity and challenge many livelihoods. They are the dominant force in the nation’s retail sector worth $800bn (₹600tn) in 2019-20 and are projected to reach $1.5tn (₹1,121tn) by 2030.
E-commerce represents only 5% of the sales in India, even between the pandemic.
JioMart was launched in 2020 and has attracted many customers because of its large discounts. Other than this, the shopkeepers can also shop in their B2C store, the JioMart Partner app.
The chief point of attraction is the prices, which is 20-30% lower than the traditional distributors.
Udaan, a B2B platform to supply the shops, was launched five years ago. They have 80% of the market for online sales to Kiranas. But with the arrival of big player JioMart, the peace in the distribution sector is disturbed.
As a result, many companies with more resources are arriving on the scene, offering 15% discounts. The margin for average distribution is 3-5%. Other sufferers are the big consumer brands.
The advantage of these brands is the distribution network, even in this era of e-commerce. While e-commerce is only 3-8%, the rest 92% is handled by the traditional distributors.
Their strength over the brands was witnessed when the distributors went into a strike, protesting against the unfair pricing. They declared to the manufacturers that they will boycott the sales of Hindustan Unilever and Colgate-Palmolive products.
These companies then met with the protestors and strike was averted.
They are also threatened by online delivery companies like Dunzo, who bring essentials to the customers’ doorstep. This month Reliance Retail Ventures bought a 25.8% stake in Dunzo for $200m.