Surviving lockdown: Kirana stores, e-commerce players develop symbiotic delivery models

The pandemic and the subsequent lockdown, which have hit the supply chain for most retail players, are shaping up a new delivery model. Emerging from the crisis is a partnership between deep-pocketed e-commerce giants such as JioMart, Amazon and Flipkart, and the humble mom-and-pop stores.

While e-commerce retailers are betting on kirana stores to ease last-mile delivery bottlenecks, the latter are gaining access to technology that enables them to better service customers locally.

‘Game-changer’

“If done well, the kirana approach can become a game-changer in alternative delivery models by providing superior customer experience and flexibility in the last-mile supply chain. It will also help transform the kiranas to serve the new set of consumers who are more tech-savvy and want personalised services,” said a Flipkart spokesperson.

Flipkart has extended its local partnership programme to tailors, basketball coaches, owners of mobile recharge shops and beauty parlours, among others, who can make deliveries during off-peak business hours. “The network of local grocery stores that we’ve tied up with act as warehouses from where products can be shipped to the neighbourhood,” the spokesperson said.

Last week, Amazon India announced an investment of ₹10 crore to strengthen its pilot ‘Local Shops on Amazon’ programme that has added over 5,000 physical stores and retailers on to its platform from more than 100 cities. Amazon said it will use technology, training and other capabilities to power local shops across India to sell online.

JioMart, the new commerce venture from Reliance Retail, has also launched a programme with local stores.

Demand upsurge

The push towards this model is being driven by increased demand for groceries and essential products on online platforms amid the lockdown. Over the past week, Amazon Pantry has added 60 new cities to deliver essentials, taking its total network to 85 cities pan-India.

“Customer demand in all these cities is more than 2x the pre-lockdown demand. Certain categories like staples and packaged foods continue to see more than 2.5x increase in orders over an average day pre-lockdown,” said an Amazon spokesperson.

However, most of the e-commerce players do not have the delivery infrastructure to meet the increase in demand and hence were forced to stop taking fresh orders. This meant that consumers had no option but to buy from kirana stores. A recent McKinsey report on consumer behaviour said that 35 per cent of the consumers in India have switched grocery stores, driven by proximity and product availability, a third of whom do not plan to go back.

“This demand has pushed the small retailers to use digital platforms in obtaining and delivering orders to their consumers’ doorstep. This is a new evolution that has pushed the players to understand the potential of e-commerce,” said Praveen Khandelwal, Secretary-General, Confederation of All India Traders (CAIT).

In the pre-Covid-19 era, going hyperlocal was a non-starter. Players who even attempted to try partnering with kiranas always faced issues either because of a lack of adaptability by the local stores or gaps in the business model itself. Manish Saigal, Managing Director, Alvarez & Marsal India, said: “There was a lack of adoption of technology and integration with e-tailers to manage cash on delivery, settlement with e-tailers and adapting to new digital payment on delivery mode.”

Broken chains

This has now changed. In the past few months, because of the pandemic and the lockdown, the supply chains remain disrupted, revenues remain slashed and consumer sentiment is subdued. The delivery network of e-tailers and logistics companies is relatively weak. “There is (now) an opportunity to leverage the kirana network to do hyperlocal deliveries,” said Saigal.

For small players like Sanjay Kabra, a pharmacy owner in Jalna, Aurangabad, the lockdown has significantly impacted sales. He now sells on the Amazon Local Shops programme.

A mixed blessing

Saigal believes that the new models are likely to solve the legacy issues that players have faced “in terms of costs, reliability, and scalability. It will also build an ecosystem to drive future growth.”

On the flipside, according to CAIT’s Khandelwal, even as partnerships with e-commerce players look attractive at this stage for kirana stores, it is important to keep the former in check. This would keep at bay “malpractices including predatory pricing, deep discounting, loss funding and having preferential seller system”, he said.

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