Covid-19 effect: E-commerce companies turn to kiranas for distribution

By: |
May 19, 2020 3:40 AM

The supply chain disruptions caused due to the lockdown and prohibitions in terms of deliveries across various regions has resulted in e-commerce majors tying up with local kiranas or neighbourhood mom-and-pop stores.

The ongoing crisis and economic uncertainty following the Covid-19 pandemic has led to e-commerce companies looking for unique hyperlocal distribution tie-ups.The ongoing crisis and economic uncertainty following the Covid-19 pandemic has led to e-commerce companies looking for unique hyperlocal distribution tie-ups.

The ongoing crisis and economic uncertainty following the Covid-19 pandemic has led to e-commerce companies looking for unique hyperlocal distribution tie-ups. The supply chain disruptions caused due to the lockdown and prohibitions in terms of deliveries across various regions has resulted in e-commerce majors tying up with local kiranas or neighbourhood mom-and-pop stores.

Recently-launched online store JioMart by Reliance Industries, which went live on WhatsApp in select locations in Mumbai, claims to have tied up with millions of kirana stores. Paytm Mall, meanwhile, announced its partnership with 10,000 neighbourhood stores to scale up its grocery delivery services around the country.

“We have been investing in scaling our hyperlocal operations over the last few weeks and are now offering delivery of grocery essentials in more than 20 cities, with plans to expand further,” says Srinivas Mothey, senior vice-president, Paytm Mall. The company plans to offer technological support and services such as inventory management, payments and local logistics, etc to these stores.

Amazon India, which for some time now has been running a pilot with over 5,000 corner stores on its platform, too, plans to further expand its ‘Local Shops on Amazon’ initiative and invest Rs 10 crore in it.

Besides these, Flipkart has also had tie-ups in place with kiranas since last September. However, the company is mostly tapping them for last-mile deliveries unlike other companies, which want to deploy them for selling essential products hyper locally.

“Today, we have 37,000 kirana partners, of which 12,000 act as Authorised BuyZones (assisted buy zones for new customers) and close to 25,000 of these are partners in last-mile delivery activities, across the country,” says a Flipkart spokesperson.

Experts say the move to tap kiranas by these companies is to get a better hold on the FMCG market in the country initially. According to market research agency Nielsen, there are 120 lakh kirana stores in the country and these account for about 90% of FMCG and domestic retail sales. On the other hand, only 2% of overall FMCG sales in the country go through e-commerce currently, as per Nielsen.

In such a scenario, kiranas can play a vital role in the strategies of these companies to better tap the market and gain more insight into customer behaviour. Kiranas could in turn also benefit by getting insights on fast-moving items, thereby managing inventory and capital in a better way.

Post the crisis, experts say, these partnerships can be leveraged by e-tailers to expand to other categories, too.
“While essential products are ordered more frequently by customers currently, the average order value (AOV) is smaller and margins are well defined with limited expansion. Hence, these companies would eventually want to expand to other categories, unstructured products and non-branded products which have higher margins,” says Ankur Pahwa, partner and national leader – e-commerce and consumer internet, EY India.

The biggest challenge, however, for these companies is to figure out the right model to engage with kiranas. Currently, most players have adopted a hyper local model, which had not proved cost-effective for e-grocery companies like Grofers and BigBasket earlier, which later moved to an inventory-led model.

E-commerce companies could also have a tough time convincing the general store owners for adapting the new approach.

“A kirana currently buys from 30-40 FMCG distributors, who apart from delivering the stocks every week, also help them with merchandising etc. Not only will these e-commerce firms have to replace these distributors but also offer all the services offered by them to the store,” says Rajat Wahi, partner, Deloitte India.

Furthermore, e-tail majors may have to continuously provide lucrative offerings to kiranas to make them stick, including discounts, financing credits, working capital efficiency, data analytics, etc.

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