Do you know that 7 Eleven started off as an ice house in Texas in 1929. Seeing the lines outside the store in the early morning the local dairy, baker and egg handler asked the store whether they would be interested in selling their milk, bread and eggs and when the answer was Yes, World’s first convenience store was born. Over time 7 Eleven would go on to become the largest convenience stores globally although it is now 7 & I Holding of Japan that owns the 7 Eleven brand.
Growing up in India I didn’t really miss the 7 Eleven as we had the local Kirana or our convenience provider and went there to buy the rubber ball for our cricket or “poppins” or last minute stationery for my homework. However, in those times everyone’s Kirana and Dukaandaar (shopkeeper) was different and we were quite ok with it.
In today’s India with rising incomes and aspirations, even Vada Pav and Jhadoos (brooms) are preferred in their branded and standardised versions. All consumers want a better experience. The trends of modernisation are clearly visible in other consumer categories – consumers moving from Markets to Malls, Street food on the street to eating in Food Courts. Modernisation is imminent and grocery is not far behind. To borrow a quote from the founder of Zepto – ‘No developed country has an undeveloped grocery market.’
Grocery or Kirana is the largest unorganised market with over 12 million Kiranas serving 310 million households. In India the modernisation of grocery started in the early 2000’s with supermarkets and hypermarkets and today we have some interesting evolutions like quick commerce for the urban affluent and Stand Alone Modern Trade (SAMT) stores and neighbourhood store chains emerging in Tier 2+ towns. I don’t believe that Kiranas will die but a lot of them ( not all ) will modernise into modern store chains as we have seen in other countries and SE Asia in particular.
Our consumer preferences, phase of economic development, urban and rural conditions and demographics closely resemble that of SE Asian countries. In both India and SE Asia, informal incomes means buying in small quantities more frequently, preference for fresh produce, low penetration of cars has restricted shopping to the neighbourhood.
As a contrast, when Walmart started in the 60’s more than 80 per cent of American households had cars and women could drive. Compare that with an Indian Tier 3 town where vehicle penetration is less than five per cent and women don’t drive.
In most developing nations, the modernisation of grocery kicks in post a per capita income of USD 2,500. According to a McKinsey study in SE Asia, while large formats ( hypermarkets and supermarkets) were the first to arrive, it is the small format that has captured the last share of the transition to modern retail. In countries like Thailand, 7 Eleven is as ubiquitous as Pad Thai and even has an installation in the Thailand Cultural Museum.
From a grocery standpoint, what is more interesting is Indonesia where Alfamart & Indomert have 40,000+ neighbourhood grocery mini marts and have captured 75 per cent of the modern grocery retail market. Again, while most talk about ecommerce growth in China, they are unaware that the country has added over 150,000 small format stores in the last 8 years. And nowhere is the pace of modern grocery more blistering than in Vietnam where established regional Asian players entered this fast rising economy and have built out over 10,000 small format stores in less than 10 years.
The same conditions which have led to the small format neighbourhood stores success in SE Asia exist in India. Additionally with digital and omnichannel strategies, these stores can also leverage the advantage of quick delivery as and when consumers in their cities mature into it. Last mile for ecommerce is also an intuitive evolution.
One of the questions I often get from the “Kirana Bhakts” is why a consumer in a small town will shop in a modern store vs a Kirana when they could get the same products. There are several reasons but the elegant answer is because the Modern Stores are built on the concept – “Let the consumer come in”. There is endless discussion on consumer experience on a mobile phone app but nobody gives a thought to how poor a consumer experience it is to stand outside a Kirana, shout at the shopkeeper for service, ask to bring down the product or ask the prices multiple times ( 85 per cent of Kiranas are barrier entry and don’t allow the consumers to come in). “Letting consumers come in” and transparent pricing are enough for consumers to switch. They all want a Better Daily Shopping experience – all of them.
And why chains and not stand alone stores – well some will survive, some will expand and become small chains or transform. The largest benefits of chains is scale which is a huge advantage in a low margin business – other benefits include a standardised consumer experience, private label, better merchandising, better margin from brands, loyalty programs, ability for a company to run omnichannel and compete with ecommerce and quick commerce.
We will also see these Modern Stores becoming more than grocery evolving slowly into neighbourhood mini malls as has happened with Convenience Stores in SE Asia by adding on services like Banking, Lottery, Digital Services, Kids entertainment, Food and Beverage etc to provide an even more enhanced consumer experience.
The Indian grocery market will overtake the US in the next 6 to 10 years. These are exciting times with a lot of innovation and transformation and players big and small will need to adapt to changing consumer aspirations and needs. Perhaps Bob Dylan meant “Store” and not “Stone” when he sang – And you better start swimmin’ Or you’ll sink like a stone For the times they are a-changin’.
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