Transforming Kirana Stores : To Drive Economic Growth

TRANSFORMING
KIRANA STORES*
TO DRIVE
ECONOMIC
GROWTH
An approach to promote retail
sector modernization in India
In collaboration with Trust For Retailers and Retail

Associates of India (TRRAIN)
*Traditional Grocery Retailers
Transforming Kirana Stores to Drive Economic Growth 2
Foreword
India is a nation of shopkeepers and as of 2019 only 12 percent of the country’s retail trade
is organized or modern. The rest is supported by small traders, retailers, and Kirana store
owners. In the food and grocery segment, more than 95 percent of the business is in the
hands of traditional retailers. Honestly, they run the Indian kitchen. It has been amply
demonstrated during this COVID-19 pandemic, with these neighborhood stores serving
1.3 billion Indians without creating a sense of panic. The nation needs to salute that.
In today’s times when the preferences of the customer are changing, there’s a need for
change in the working and operations of these unorganized or traditional store owners.
Kiranas or traditional store owners play an important role in the Indian consumption
ecosystem. These store owners have been friends of their customers, keeping an eye
on their needs as well as adapting merchandise buying in line with the seasonal and
festive needs of their customers. Even today if we go to our nearby Kirana store,
he’d know the pulses we buy and the brands we use.
When Damodar Mall came out with his book Supermarketwala, a guide for marketers and
modern trade enthusiasts, we spoke to him and asked him if we can do something for
smaller Kirana owners, which can help them adapt to the changing times and grow their
business. That conversation gave birth to our “Be A Supermarketwala” project. Our book,
Be A Supermarketwala, was launched last year, and has found its way to thousands
of medium and small businesses and Kirana owners.

However, at TRRAIN our endeavor is to reach millions of Kiranas and help them modernize
themselves by adopting new methods of retailing, physical as well as digital, so that they
can continue to serve the neighborhood and grow. We continued to invest in the project
and have created a digital version of the book in a self-learning format so that the next
generation of Kiranas can modernize themselves.
We reached out to Accenture to seek their support in understanding the impact of the
transformation of Kirana stores, their customers, and the ecosystem. We were heartened
by Accenture’s support and belief in our project. We believe this is the first such exercise
being undertaken in retail in India, where we establish the pivotal role that the Kiranas
play and the impact of their transformation not just on them and the industry, but also
on India as a whole. I believe any Kirana store owner who modernizes his store will be able
to add value to his customer and improve his business and profitability.
This report will help establish the role of Kirana in the community, its importance in the
value chain and contribution it makes it to the country. We believe the report will serve
as a foundation as we march on in our journey to impact millions of Kirana store owners
in India, make “Vocal for Local” the way forward and support our Prime Minister’s message
of being “Atmanirbhar.”
Namaskar,
B.S. Nagesh
Founder,
Trust For Retailers and Retail Associates of India (TRRAIN)

Main Authors
B.S. Nagesh Sameer Amte

Founder, Managing Director,
Trust For Retailers and Retail Accenture Strategy
Associates of India (TRRAIN)

Local neighborhood shops need the support
of the retail ecosystem and the government
to adopt and sustain modern retail practices
and reverse the trend decline in sales,
profitability and employment in this vital part
of the Indian economy.

Contents
08 Executive Summary
12 PART 1. The Compelling Need for Transforming Traditional Trade
20 PART 2. The Kirana Transformation Story
Research Methodology
Factors Driving Transformation
Factors Affecting the Impact of Transformation
Transformation of Kirana Stores Benefits Consumers
Kirana Store Transformation Benefits Government
35 PART 3. Blueprint for Transformation
The Transformation Framework: Seven Stages

Challenges: Sustaining the Modern Format
40 PART 4. Building an Enabling Ecosystem: The Role of Stakeholders
Conclusion

Executive Summary

A ubiquitous part of the Indian By 2021, it is expected that the share of trade man-
aged by 13 million Kirana stores will reduce to 75
retail landscape, Kirana stores percent of the total retail industry from the current
level of 88 percent.
play a crucial role in the Indian
retail sector, which in turn Since consumers are increasingly buying online or
shopping at supermarkets or larger, modern stores,
contributes almost 11 percent Kirana stores are losing their consumer base. As
they lag in adoption of modern retailing techniques
of the GDP in India and eight such as digital payments, inventory management
percent of its total workforce. or even an efficient store layout, Kirana stores are
unable to compete with other retail formats.

This ongoing disruption in traditional trade needs to be or the positive impact on rural consumption
mitigated through the modernization of Kirana stores. and GDP.
In this report based on primary research, we first
assess the impact of modernization at individual store The surge of consumer purchases from local
level and then on the consumer and the economy. Kirana stores during the national lockdown in the
We then pivot to the role of all stakeholders in the retail COVID-19 pandemic strengthens the case for their
ecosystem and consider strategies and initiatives that modernization. Our survey found more consumers
are necessary to reshape the Indian retail industry. preferred to buy from the neighborhood stores
for their daily needs. Further, the local shops were
Our research reveals that all Kirana stores that better stocked than e-commerce companies that
modernized to keep pace with consumer preference were struggling with the sudden disruption in their
for modern formats, reaped significant benefits in supply chain.
terms of sales, product category growth, and better
cost management. Our research and findings make it clear that
the Indian retail industry needs to expedite the
The gains from transforming an informal sector into modernization of the small retail formats in a
an organized one are considerable—be it the increase sustainable manner.
in tax collection, the growth of local businesses

The future of small retail formats (Kirana stores)
will hinge on the steps taken now to modernize this
segment. The role the government and industry
play will enable and accelerate this transformation.

PART 1
The Compelling
Need for Transforming
Traditional Trade

Surviving structural change in the industry
Millions of small shops—colloquially called Kirana stores South Asia
(outside India),
constitute the major part of the retail sector which as a sub-Saharan Africa,
whole contributes 11 percent of the GDP (second after and poorer
agriculture at 18 percent). Food and grocery (items that countries in
China, Eastern Southeast Asia (e.g.
Kirana stores typically sell) accounts for more than Europe, Russia, Cambodia), Bolivia
65 percent of the retail sector in India. Mexico and parts of other parts of
Central America, Central America
and Southeast Asia, 4th Wave:
The retail industry employs eight percent of the workforce Indonesia,
South-Central and India Late 2000s
or approximately 43 million, with most of them in the Europe and
unorganized and informal parts of it such as Kirana stores. South Africa
South America, East 3rd Wave:
Although these traditional stores are a vital component
Asia (outside China
2nd Wave: Early 2000s
and Japan), parts
of the retail sector and are protected by government policy of Southeast Asia Mid to late
(e.g. the Philippines
against foreign investments, they have been on a slow and Thailand), 1990s
and inevitable decline from the beginning of 2000, like North-Central
what their peers in most developing countries have Europe and
South Africa
been experiencing.
1st Wave:
The development of modern retailing and wholesaling Early 1990s
which began in the USA in the 1980s spread all over the
rest of the world in four successive waves.1
Though retail modernization in India began in the early

2000s (in the third wave) it picked up speed only recently.
Retail transformation waves in emerging markets (spatial

1
Reardon, Timmer, Barrett and Berdegué (2003) distinguish four waves expansion outside North America and Western Europe)
of supermarket expansion that have encompassed different regions
and countries

B2B e-commerce company Udaan became
a unicorn in just 2 years; IndiaMart turned
profitable and B2C e-commerce players like
BigBasket, rocked the industry and spawned a
rash of similar models that aimed to make daily
grocery shopping easy as tapping an app. Many
other startups like Swiggy and Dunzo have also
Since 2016 following the entered grocery delivery during the COVID-19
launch of extremely affordable outbreak. Suddenly, the supermarket chains and
large modern stores were not the only ones taking
4G services by Jio and the away the market share of Kirana stores but also
push to digital wallets after startups and even digital natives like Amazon.
demonetization, there has Consumption growth

been an explosive growth
of new business models. It is estimated that by 2030, growth in income
will transform India from a lower-income-class-led
economy to one driven by the middle class. Over
100 million households will be added to the high
and upper middle classes and these will drive
60 percent of consumer spending (or almost
USD 3 trillion of consumption).

COVID-19 Crisis
Evolving consumer preferences

During the lockdown, consumers
The growing popularity of the new retailing turned to Kirana stores for their daily
formats reflect new buying preferences of
Indian consumers. A burgeoning millennial provisions as the big stores struggled
population is aspirational and willing to buy to deliver due to supply chain
new categories as online players create brand
awareness even in the smallest towns. Malls have disruptions. Kirana stores with their
sprung up in Tier II and Tier III cities such as links to local distributors were better
Lucknow, Kanpur, Panaji, Udaipur.
stocked and able to cater to the needs
Consumer purchases will also change further of the neighborhood. Most of these
as more women become income earners.
Discretionary spending is expected to rise as the stores accepted payments through
number of women in the workforce will likely grow Paytm or other digital wallets. The
by 40 percent to touch 10 million over the next
five years. unprecedented situation of the
lockdown highlighted the fact that
As consumer preferences change, more new
retail formats will be needed to cater to the Kirana stores are almost an
needs of the upper and middle-income segments irreplaceable part of the consumer’s
of the population.
daily life. The fact that these small
shops accepted digital modes of
payment showed their willingness to
upgrade to modern digital practices.

It’s time to modernize
There is, therefore, a distinct need for Kirana stores

to transform their operations and their shops, not
only to survive the competition but also to tap into
the consumer’s need for modern stores and new
ways of buying. Additionally, transformation will
help the stores withstand the ongoing structural
changes in the retail sector.
To sustain the modernization
Already the presence of modern retailers in major
cities is causing many stores in nearby areas to
of Kirana stores, it is important
either close down or lose their majority customer that the government and other
base. This trend is akin to what happened in the US
where the first wave of retail modernization
stakeholders assist the small
propelled nearly half the grocery and conventional retailers and local suppliers to
discount stores in the country to shut shop.
adapt to the structural changes
It’s an uneven battle between new business in the retail sector.
models and old formats with success favoring the
former as they leverage technology and consumer
data to provide customer experiences that Kirana
stores cannot and do not know how to match.

The same forces—the mobile Internet, software decades ago. For example, Dadar’s Sarvodaya
solutions and unified payments interfaces—that Supermarket had adopted a modern retail look
are driving the growth of modern retail—could and feel in 2003, after Kishore Biyani-owned Big
also be leveraged to help Kirana stores become an Bazaar launched its store at nearby Phoenix Mills,
important channel for growth for the industry and in South Mumbai, in 2002. Following the success
for the economy. of his store, the owner has since helped many
other traditional retailers in Gujarat, Uttar Pradesh
These factors have over the years attracted a lot of and Maharashtra to upgrade their stores to follow
attention to the potential of making Kirana stores modern retail practices.
part of the formal economy. FMCG companies like
Hindustan Unilever and retail giants like Reliance The message and inspiration for Kirana store
Industries, Walmart India and Metro Cash & Carry, transformation was spearheaded by certain
startups like Kirana King, ShopX and even digital traders communities in India who own and
payments companies like PhonePe have created operate family business related to Kirana stores.
a range of engagement models to work with Many local Kirana stores followed their lead to
Kirana stores to modernize them, providing modernize. Even a few standalone supermarkets
them tech solutions for customer-facing and were also established by individuals in the early
backend operations or meeting their working 2000s (See Figure 1).
capital needs.2
More and more Kirana stores are now participating
But even before the FMCG companies and big in the transformation process. But most of them
retailers had got into the act, the move towards lack confidence and guidance to transform.
modernization had already started nearly two
2 Source: Economic Times: https://economictimes.indiatimes.com/

industry/services/retail/indias-ubiquitous-kirana-stores-are-finding-
themselves-in-great-demand/articleshow/69707009.cms

Figure 1
Many stores are adopting change towards modernization
Early adopters in early 2000s like 2000

‘Sarvodaya Supermarket, Dadar West’
Spread the message mainly through 2005

Kirana trade communities
Transformation adopted by a few major 2010

Kirana owners (large provision) till 2015
+
New standalone supermarkets
established by individuals 2015
After initiatives led by Kirana King,

2020
Walmart, Metro, ShopX etc., more
Kirana stores are participating
in transformation
What they lack is confidence and guidance.

Against this backdrop, Accenture decided
to assess the transformation of Kirana stores3
and analyze what worked, what was the impact,
and what needs to be done by industry and
government to create and sustain positive
change for the millions of small grocery stores
that dot the Indian retail landscape.
3 The stores considered transformed or modernized have one or many of the following features:
1) An efficient grid layout with self-service format, check-out counters with POS and shopping trollies/baskets
2) Mode of accepting digital payments – cards and wallets
3) Use of technology such as retail ERP software and POS machines and digital wallets for billing, inventory management, MIS reports
and other features assisting store operations and including technology for price monitoring
4) Use of modern retail principles for store management including product placement and assortment and pricing

PART 2
The Kirana
Transformation Story

Research Methodology
Accenture Research, in collaboration with While there are many different types of Kirana
TRRAIN, modelled the economic impact of Kirana stores, this report covers large and medium
transformation for India. To estimate the economic provision stores who are ripe for transformation
potential of Kirana transformation, we analyzed on account of their location, size and owner profile:
key macroeconomic, demographic, social
development and industry indicators across India • Large provision stores with a strong customer
and the retail sector. We also used economic base of monthly shopping, typically spread over
value modelling across several scenarios based on 500 to 2000 sq. ft. and have been in existence for
the analysis of macro-economic indicators. This more than 15 years. These are typically run by 2nd
was further validated by retail expert interviews, or 3rd generation owners.
in-depth interviews of transformed Kirana store
owners and analysis of consumer behavior in • Medium provision stores that are around 200 to
transformed Kirana stores. The study covered 500 sq. ft. in size, and largely sell to customers
transformed Kirana stores of different sizes, of their locality. These stores keep most of the
formats and store owner profiles across India4 to product range but are limited in customer
identify the outcomes at both the individual store catchment area.
and ecosystem level. In addition, the field research
included the outlook of Kirana owners towards
modernization and the barriers they faced in their
transformation journey.
4 Many of the stores covered in the research were present in small

towns (of Maharashtra) with population as low as 10,000.

Qualitative interview and transformation impact data of
57 Kirana store owners who had completed transformation
Tier-1/2 cities in India and small towns (villages) 5

in Maharashtra
1
18 7
from Tier-1 cities
16 1
22
2 1
from Tier-2 cities 10 5
23 3
from small towns
Independent
Consultant

What made these stores
undertake transformation?
Key findings
Swift improvement in turnover
While competition from modern retailers would 01
be the obvious answer, the 57 store owners Each and every Kirana store that modernized
Accenture interviewed cited a combination of reaped significant gains in sales turnover
factors. For example, 56 percent of them said and profits and achieved better inventory
that the need for store revamp was a big driver, management. The revenue growth ranged
52 percent had been approached by cash & carry between 20 percent to 300 percent with an
retailers such as Metro, Walmart and consultants. average of 135 percent, while the profits
Nearly half of them had found it difficult to grew 30 percent to 400 percent, depending
manage the store operations effectively without on the level of transformation undertaken
any guidance. And only about one-third had been (See Figure 2).
compelled by falling sales to make the decision
to transform. There were additional outcomes due to
increased sales. For example, a store
56% 52%
owner in Bangalore whose business grew
100 percent after modernizing was thrilled to
achieve better cash conversion and did not
said that the need had been approached need to extend credit to his customers.
for store revamp by cash & carry
was a big driver retailers such as For one of the store owners in a suburb of
Metro, Walmart Mumbai, the biggest gain was the ability
and consultants to manage his inventories better in his tiny
400 sq. ft. store. Many in saturated
50% 33%
middle-and low-income neighborhoods felt
empowered to compete with chain stores
like Big Bazaar and Easyday. They reported
had found it difficult sales improving by 10 percent solely
had been compelled
to manage the store because of better display on store offers and
by falling sales to
operations effectively product launches on screens and shelves.
make the decision
without any guidance to transform

Figure 2
The impact of transformation on Kirana stores
20-300% Average Sales Impact (% growth)

Revenue 184%
Note:
135% The sales impact
123% shown is skewed
30-400% 76% based on level of
Profit guidance received
by the stores we
covered, and may
Median 20% Tier-1 Tier-2 Town Grand Total
not represent
actual potential
Customers of city/town
0 1
Median 50%
SKUs
Less than 0%
25 17
Median 50% 0 to 20%
Employment 20% to 50%
100% 14 50% to 100%
Median 50% More than 100%

Tax Contribution
100% retailers’ said Retailers with % sales
business has increased growth after
post-transformation transformation

Increase in shopper basket size Low inventory costs
02 03
As the stores modernized, they One of the biggest gains for store
witnessed a qualitative change in owners was a greater control on
what the consumers bought. inventory, freeing up cash reserves.
As store owners had little visibility
Before the transformation, most of into their inventory before the
these stores largely sold grocery transformation they often were left with
staples such as rice, flour and oil. expired or damaged products. They
However, after the transformation, would place orders for moving SKUs in
every store witnessed expanded sales an ad-hoc manner or mostly based on
in nearly all FMCG categories. Packaged fortnightly visits from distributors. They
food such as snacks, biscuits and would stock up non-moving SKUs for
branded grocery items saw the highest up to a year. The inventory pile would
growth across 70 percent of the stores. often attract rodents, adding to the
Sales of large packs also increased cost of damage the owners would incur.
across every store. Customers were also
more willing to uptrade. For example, After modernization, with the use of
customers at a shop in Jalgaon, inventory management systems, these
Maharashtra, switched to dish washing stores were able to sell more SKUs
liquid from detergents and bars after (roughly 3000 to 7000 as against 500
product trial offers. to 2000 earlier). Orders of all SKUs
began to be placed on sales generated,
which resulted in inventory of moving
SKUs coming down to 7 to 21 days while
that for non-moving SKUs at up to three
months. As all the stock was on the
shelf, they suffered no damage.

The transformation provided
competitive advantage to the retailers
that had transformed their stores.
More than 76 percent of the retailers
reported increase in the number of
customers, 67 percent said they
increased their staff, 90 percent of
the retailers felt they had more time
for themselves, and most of the stores
Factors affecting the
could avail more schemes and benefits impact of transformation
from FMCG brands due to their
classification into modern trade or
incentives based on sales achievement. While all stores benefited from transformation,
the intensity of impact varied considerably
A majority of retailers said that 30 and was correlated to three major factors—locality
percent to 50 percent of their sales of the store, level of transformation, and store
were happening through credit card/ owner’s attitude and guidance received from
digital payments pushing them to experts (See Figure 3).
install digital payment systems either
before or during the transformation. Based on these three factors, the impact was
categorized by the type of store (or ‘archetype’)
The impact of transformation extended
to the local community. The Accenture
study found that the medium-sized
traditional stores run with the help of
one employee increased their staff
strength to three or four people on an
average after modernizing.

Figure 3
Factors influencing impact of transformation
Factor contributing Impact on Typical reasons
to transformation impact revenue
Level of • Only change of shelfs and store-layout 20% to 30% • Increased visibility of all products, impulse
01 transformation
completed
enabling self-service for the customers purchases and sale of large packs
• Large-sclae renovation of the store 20% to 50% • Attracting upper-middle class customers
with additional space, floors etc. (if present in the locality) and sale of
premium range, attracting monthly
shoppers from large modern retail chains
like Big Bazaar, Easyday
Potential of • Store-location in high footfall 30% to 50% • Increased walk-in customer base, attracting
02 the locality
area such as near railway
station, market
customers residing in nearby areas
• Store-location being in highly 20% to 30% • Availability of SKUs (aspirational)

untapped consumption potential
market e.g. outskirts of city,
sub-urban markets, rural area
Know-how and • Know-how use of data and 50% to 100% • Educated decision making
03 owner’s DNA technology/expert guidance
received in the field
• Store-owner DNA and involvement 30% to 50% • Ownership
In optimistic scenarios, sales growth of 200% to 300% could be achieved,

while on the lower side sales growth of 20% to 50% could be observed
Source: Accenture and TRRAIN Analysis

Store Archetypes: The study identified and
classified six distinct Kirana store transformation
archetypes. Based on the outcomes of field
research, Figure 4 briefly describes their
characteristics and the impact of modernization.5
5 Note: The store archetypes are directional

Figure 4
The transformation impact varied according to the store archetype
Retailer Archetype Typical Store Owner Profile Potential of the Locality Shopper Profile Impact
Prosperous &
Sophisticated
• Family owned
• 2nd/3rd generation currently active
Medium to High • Mixed-middle to upper
middle income neighborhood 2x - 4x
• Large provision store format • Ready to experiment with Sale in 3-6 months
• Fresh thinking. Aspirational young newer/uptrading products in driven by new store
owner with amibitons to grow. Pride some categories
factor is important • At the same time monthly
• Success is used for expansion to shopping of groceries is fixed
other areas/stores
Prosperous &
Conservative
• Family owned
Medium to High • Usually high to mid income
consumers 1.5x - 2x
• Large provision store format • Have a large shopping list on Sale in 3-6 months
• Happily serving customers in Kirana a monthly basis
format, while applying modern retail • Value conscious but could
techniques at slow adoption potentially uptrade
• Open for experimentation
Young & Savvy • Self-owned business started few

years back
High • Uptrading mid/low income
consumers 2x - 4x
• 1st/2nd generation currently active • Highly value conscious, but Sale in 3-6 months
• Medium to large provision aspirational
store format • Both ‘list based’ buyers, plus
• Aspirational, young, educated and growing walk in,
computer-savvy with ambitions to grow impulse purchasers
the business
• Highly positive and very open to
receive external help/knowledge
• Willing to invest for transformation

Retailer Archetype Typical Store Owner Profile Potential of the Locality Shopper Profile Impact
Constrained,
but Comfortable
• Family owned
Low to Medium • Low middle/middle
income neighborhood 2x - 3x
• Medium to large provision store format • Highly value seeking Sale in 3-6 months
• Happily serving customers in Kirana behavior
format, while applying modern retail • Shoppers buy and stock
techniques at slow adoption in smaller quantities
• Positive attitude towards self-serve
formats
• Interested in better store management
and freeing-up time
Constrained,
but Aspirant
• Self-owned business started few
years back
Medium • Could vary depending on
where the owner has space 1.2x - 1.5x
• 1st/2nd generation currently active and/or his familiarity with the Sale in 3-6 months
• Medium provision store format neighborhood
• Educated owner in mid-age group
• Open to learning modern ways of
managing store
MiBrEg (milk,
bread, egg):
• Daily needs store in limited
residential area
Low • Usually middle income
neighborhood 1.2x - 1.3x
Miniscule • Small provision store format • Highly value seeking Sale in 3-6 months
• Not keen for growth and competition behavior
• Very small in size - need for • Would rather buy monthly
transformation still not very clear groceries in a modern
retail format or
e-Commerce wherever
prices are cheaper
• Neighborhood is highly
residential, society with
limited scope for growth

Transformation of Kirana Stores Benefits Customers
A self-serve format store provides

an improved and more convenient
way of shopping along with a better
range of products. In addition, transformation could also result in
the change in consumption habits. Due to
transformation and subsequent improvement
The access to monthly groceries in supply chain, consumers in small towns
improves with availability within could access product categories which were
a two km radius which is usually not available before. For example, sanitary napkins
category at a small store in Lucknow witnessed
the preferred radius for nearly 80 percent growth within three months as
shopping groceries. more women consumers were able to easily add
this to their basket in this ‘self-serve’ format.
Consumer rights protected by
maximum retail pricing of products
and transparency in billing, easier
returns, correct information about
brand offers and improved
quality assurance.

Kirana Store Transformation Benefits Government
Improves rural consumption and GDP Expands the formal economy

As the sales growth experienced by the transformed Out of 13 million traditional grocery stores in
stores shows, modernization of traditional trade India, the transformation of an estimated
will drive consumption, especially in under-served 1.4 million stores (large and medium size stores)
semi-urban and rural markets where current could expand the formal economy by
demands are unmet. We observed that many approximately 250 percent with computerized
people living in such areas need to visit nearby billing and ledger systems. This would also
town or district for their monthly grocery needs. enable government to have better visibility
For example, residents of Lasalgaon travel 60 km and traceability into what was previously the
to Nashik for grocery shopping due to availability of ‘informal’ economy, as transformation
the brands. We estimate retail modernization could essentially always comes with adoption of
boost consumption by five percent to 20 percent, IT systems. As nearly half the sales in modernized
creating a positive impact on GDP. It will also help in stores were made through digital payments,
strengthening rural supply chains and accessibility. compelling store owners to invest in digital points
of sale, transformation would also accelerate the
government’s Digital India initiatives.

Increase in tax contribution (that’s over 0.62 percent employment growth).
The fact that this industry can support low-skilled
We also found that as Kirana stores transformed, jobs at mass scale implies that government could
the tax contribution of retailers grew by an significantly reduce unemployment just by
average of 50 percent. Consider then that the supporting the modernization of Kirana stores.
transformation of 1.4 million stores would lead
to a 240 percent growth in income tax
Boost for domestic industries
contribution from retail businesses—resulting
in an incremental income tax of approximately
As local neighborhood shops modernize, there
INR1,600 crores.
would be a positive impact on the demand
of local artisanal food items across different
Driving local employment cities and towns, which will in turn stimulate
small-scale businesses such as food processing,
One of the most important benefits is that Kirana and home-made artisanal products. For example,
transformation promotes both self-employment one of the large provision stores located in
and employment of the local community. Our Gujarati community of Mumbai started selling
research found an average 50 percent growth many artisanal food items such as Khakra,
in employment in the stores that modernized. Thepla and pickles, which now contribute
Overall, the transformation of 1.4 million stores significant portion of its sale.
can generate 3.2 million new jobs in the market

PART 3
Blueprint for
Transformation

Apart from identifying and estimating the positive is approximately INR 1,500/sq. ft. Figure 5 shows
impact of modernizing Kirana stores, we also the breakup of the infrastructure cost along with
studied the steps and investment needed other fixed costs involved in the transformation.
to transform.
Most of the stores–with average sales per sq. ft.
Based on Accenture and TRRAIN’s Analysis from of more than Rs 2000 per month–could repay
the research findings, we estimate that the total the borrowed capital within three years even with
infrastructure cost for a 3,000 sq. ft. store revenue growth as low as 30 percent.
Figure 5
Broad investment required for store size of 3000 sq. ft.
COST OF INFRASTRUCTURE ~ RS. 1500 /SQ.FT.
Initial setup cost per sq. ft. Cost (Rs/sq.ft.) Cost of POS system
• Available with banks and payment companies
• Typically cost ranges from 0.5% to 3% of
Fixtures 250
transaction amount
Fixtures - Backoffice 30
Cost of technology (software)
Airconditioning 150 • Many softwares available in market, e.g. RetailWhizz
Equipment 10 • Typically ranges from Rs 25000 to Rs 2 lakh
Electricals 125 one time cost (and AMC contract)
Chiller / Freezers 100 Other fixed costs
• Signage ~ Rs. 100,000
Security & Loss prevention 30
• Mechanical Weighing Scale ~ Rs. 5,000
IT Equipment 250 • Launch marketing costs
Investment in stocks 500 • One month store operations cost
Source: Accenture and TRRAIN’s Analysis

The Transformation Framework: Seven Stages
An effective modernization plan involves seven systematic steps that must be taken by any store.
Figure 6
STAGE 7
STAGE 1 STAGE 2 STAGE 3 STAGE 4 STAGE 5 STAGE 6 Increased
Location Funding Store Procurement Product Product Employment,
Assessment Assessment Layout of Technology Placement Assortment Better
& Pricing Engagement
Location assessment is essential to identify Funding assessment considers the in-store capex
the customer profiles, demographic and social and the cost of the space. The store can either be
parameters, income class and external drivers owned or rented and if rented the rent should not
such as competitors. The catchment area for this be more than three percent of sales or one-fifth of
store will be within a radius of 1.5–2 km and should the gross profit, whichever is higher. Roughly, for
include at least 7,000–8,000 families to form the every 3,000 bills per month, a store requires one
customer base for the store. checkout counter, 10 shopping trolleys and
20 shopping baskets.

Store layout is important because it influences The store owner will also need to focus on
the customer’s perception of the store. The product placement practices. For example,
transformed store space should be arranged in an classify the products as Destination category,
efficient grid layout comprising aisles, gondolas, Convenience category and Impulse category.6
wall-racks, bins, pallets etc. Ideally, 75 percent of Then place similar products together following
the space should be devoted to sales, 10 percent the “top to bottom, big to small” and
to office space and 15 percent for storage. “left to right” rules.
Next is the technology component. A fully The Kirana owners must apply a mix of pricing
integrated system (retail ERP software) techniques to create a pricing policy that works
and a POS machine and digital wallets are best for them.
essential for modernization. The ERP is needed
for computerized billing, inventory management,
MIS reports and all other features assisting
store operations.
6 Destination category: Customers visit the store mainly to buy

items in this category e.g. food grains or vegetales
Convenience category: People shop for these items because they

are already in the store e.g. detergents and shampoos
Impulse category: These are unplanned purchases, often not

needed items e.g. chocolates

Challenges: Sustaining the Modern Format
While following this transformation framework will As most FMCG companies do not have
lead to significant gains in profitability, it won’t distributors in small towns, the supply chain
guarantee sustained benefits. That’s because the infrastructure in such places is limited. Our
challenges Kirana shops face over competition research revealed that only the educated
from large modern formats, weak supply chain retailers would have the wherewithal and
infrastructure and access to funds persist. information to identify right schemes and prices,
and travel to nearby towns to source on a daily
These stores still have to compete with large or a weekly basis.
modern formats that have the ability to bargain
with FMCG companies on the basis of their Additionally, small shop owners usually do not
bulk purchases. This pushes the small retailer have funds of their own to invest in modernizing.
to explore sourcing options beyond FMCG In the absence of a credit rating system for such
companies’ traditional distributors in order businesses, they cannot get loans easily from
to buy goods with lowest prices, which in turn banks either and have to rely on private lenders or
creates channel conflict within companies. friends and family.
We found that many independent supermarkets Once they are modernized, Kirana stores
in metro cities are also struggling to survive in struggle with few operational challenges such
the near future due to the competition with large as claiming credit set-off while filing GST returns
modern chains, the rising real estate costs and (which arise from non-payment of GST by
increased overhead costs of modern retail. distributors/value chain partners) and multiple
licensing mechanisms.
To overcome these challenges, Kirana stores
must remain vigilant about prices of all products Many retailers think growth in the business will
everywhere and especially in modern formats, improve their quality of life, however this growth
cash and carry retailers, wholesalers and also comes with increased costs and multiple
distributors of neighboring towns. difficulties in managing the business.

PART 4
Building an Enabling
Ecosystem: The Role
of Stakeholders

Given the benefits that the consumer, the FMCG companies
government and the industry obtain from the
modernization of small retailers, it is imperative
that the ecosystem play a more supportive role By implementing innovative retailing techniques
in transforming Kirana stores. The stakeholders such as Kirana-specific merchandising, customized
in the Kirana ecosystem need to enable the programs for product trials and assortment,
modernization process so that they can multiply FMCG companies could promote a more inclusive
the benefits they experience. development of the industry and of the society.
These stakeholders include FMCG companies, Also, FMCG companies need to plug the rural
e-commerce, cash and carry retailers and distribution gap by re-imagining their distribution
payment companies, logistic providers and strategy so that retail modernization picks up
intermediary traders and the government, momentum in small towns and rural areas, where
as well as retail associations and NGOs. there is consumer demand.

E-commerce, cash and carry Intermediary players and
retailers and payment companies logistics providers
These players could leverage modernized Kirana While traditional middlemen tend to get
stores for last mile delivery in places they cannot marginalized in the process of modernization,
reach. Their key role in the process of retail a breed of specialized and dedicated
modernization is providing know-how transfer new-generation wholesalers and third-party
and technology support (such as digital logistics providers are emerging. They are
payment solutions at POS). Many companies have financially in a better position than traditional
started moving in this direction. For example, brokers to procure, select, sort, pack and deliver
Metro cash-&-carry retailer has installed POS the goods to chain distribution centres before
machines at more than 2000 retailers. Similarly, selling to supermarkets. They need to add value to
Paytm, Google Pay and PhonePe have come up the supply chain and finance deficits in traditional
with UPI-based digital payment solutions which are procurement services.
widely accepted by thousands of retailers in India.

Retail associations
and NGOs
Retail associations and NGOs in the field play
an important role in education and capability
building of Kirana store owners. They can also
collaborate with ecosystem partners such as
government bodies to facilitate the modernization
process at scale. For example, creating and
managing a retailer database for India will be
extremely useful for targeted policy making.

Government
The government has the most important role
in the retail ecosystem in terms of its ability to
create large scale positive impact. Additional
interventions to drive the transformation will
stimulate growth in consumption, GDP, tax
contribution and employment. It will also
provide the impetus to the other stakeholders
to play their part.

A strategic approach to speed up the assimilation of Kirana stores into the formal
economy would need to combine the following elements:
01 Easier access to funds and soft loans for Kirana modernization
02 Run an awareness campaign to educate about benefits of modernization
03 Improve supply chain infrastructure
04 Create easier access to technology and fixtures needed for transformation
05 Promote capability building to adopt modern retailing techniques
06 Bring compliance reform especially in GST and licensing norms
07 Design strong incentives to move to the formal economy e.g. tax rebates
Incentivize the private sector to assist in store modernization e.g. redirecting

08 part of CSR budgets for Kirana modernization
Undertake a pilot project in one state/area for Kirana transformation and then
09 transfer learnings to scale at the national level

Conclusion
As the millions of Kirana stores in India constitute The role of Kirana stores during the national
an important contributor to the country’s GDP lockdown following the COVID-19 pandemic has
and employment, initiatives must be drawn up to underscored the indispensable part this retail
modernize this segment. Accenture’s analysis based segment plays in local neighborhoods as consumers
on field study of stores that have transformed shows depended on these shops for their daily needs.
that modernized stores generate significant positive
impact not only for themselves but also on the rest of A more inclusive and comprehensive policy in which
the retail ecosystem—from FMCG companies, logistics the government, industry and NGOs work together
providers, to consumers. to support Kirana stores transform and sustain
their business is needed. The steps taken now
Our estimates show that the government and the and adoption of modern retailing over the next
economy could gain significantly. The contribution 2 to 5 years will define the future of the Indian
in terms of tax collection and employment and an retail landscape.
expanded formal economy cannot be underestimated.

Acknowledgements
TRRAIN Accenture
Ameesha Prabhu Aditya Priyadarshan
Ahtesham Siddiqui Chetan Patil
Akash Vishwakarma Harini Mohan
Binoli Patil
Blessy Pais
Companies Supported by
Metro Cash & Carry Damodar Mall
Walmart India Chetan Sangoi

About Accenture About Trust for Retailers and Retail Associates of India
Accenture is a global professional services company Trust for Retailers & Retail Associates of India (TRRAIN)
with leading capabilities in digital, cloud and security. is a public charitable trust formed in 2011 by B.S. Nagesh,
Combining unmatched experience and specialized skills with the vision of empowering people in retail and works
across more than 40 industries, we offer Strategy and to achieve immediate and lasting change in the lives of
Consulting, Interactive, Technology and Operations retail associates in India. TRRAIN is solely committed
services—all powered by the world’s largest network of to upgrading the lives of people in retail, both at work
Advanced Technology and Intelligent Operations centers. and at home.
Our 514,000 people deliver on the promise of technology
and human ingenuity every day, serving clients in more Pankh - Wings of Destiny and TRRAINHer Ascent are
than 120 countries. We embrace the power of change to TRRAIN’s initiatives to make the retail workforce inclusive
create value and shared success for our clients, people, and diverse by creating a sustainable livelihood for
shareholders, partners and communities. Persons with Disabilities and women in retail. TRRAIN
Retail Awards is an initiative to encourage customer
Visit us at www.accenture.com service excellence in retail and awards stories of
customer service excellence by the retail associates.
Retail Employees’ Day, celebrated on 12th December
every year is a simple gesture to say Thank you to
the true hero of the industry — the retail associate.
Be A Supermarketwala is an initiative to help traditional
Indian Kirana retailers modernize by adopting the open
and self-service format, technology and science of
retailing to become more productive, profitable
and sustainable.
To know more, visit www.trrain.org
Copyright © 2021 Accenture

All rights reserved. Accenture and its logo
are registered trademarks of Accenture.

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Transforming Kirana Stores : To Drive Economic Growth

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TRANSFORMING

In collaboration with Trust For Retailers and Retail

Transforming Kirana Stores to Drive Economic Growth 3

Transforming Kirana Stores to Drive Economic Growth 4

B.S. Nagesh Sameer Amte

Transforming Kirana Stores to Drive Economic Growth 5

Transforming Kirana Stores to Drive Economic Growth 6

12 PART 1. The Compelling Need for Transforming Traditional Trade

20 PART 2. The Kirana Transformation Story

35 PART 3. Blueprint for Transformation

The Transformation Framework: Seven Stages

40 PART 4. Building an Enabling Ecosystem: The Role of Stakeholders

Transforming Kirana Stores to Drive Economic Growth 7

Transforming Kirana Stores to Drive Economic Growth 8

Transforming Kirana Stores to Drive Economic Growth 9

Transforming Kirana Stores to Drive Economic Growth 10

Transforming Kirana Stores to Drive Economic Growth 11

Transforming Kirana Stores to Drive Economic Growth 12

Though retail modernization in India began in the early

Retail transformation waves in emerging markets (spatial

Transforming Kirana Stores to Drive Economic Growth 13

demonetization, there has Consumption growth

Transforming Kirana Stores to Drive Economic Growth 14

Evolving consumer preferences

Transforming Kirana Stores to Drive Economic Growth 15

There is, therefore, a distinct need for Kirana stores

Transforming Kirana Stores to Drive Economic Growth 16

2 Source: Economic Times: https://economictimes.indiatimes.com/

Early adopters in early 2000s like 2000

Spread the message mainly through 2005

Transformation adopted by a few major 2010

After initiatives led by Kirana King,

What they lack is confidence and guidance.

Transforming Kirana Stores to Drive Economic Growth 18

Transforming Kirana Stores to Drive Economic Growth 19

Transforming Kirana Stores to Drive Economic Growth 20

4 Many of the stores covered in the research were present in small

Tier-1/2 cities in India and small towns (villages) 5

from Tier-1 cities

from Tier-2 cities 10 5

Transforming Kirana Stores to Drive Economic Growth 22

Transforming Kirana Stores to Drive Economic Growth 23

20-300% Average Sales Impact (% growth)

100% 14 50% to 100%

Median 50% More than 100%

Transforming Kirana Stores to Drive Economic Growth 24

Transforming Kirana Stores to Drive Economic Growth 25

Transforming Kirana Stores to Drive Economic Growth 26

• Store-location being in highly 20% to 30% • Availability of SKUs (aspirational)

• Store-owner DNA and involvement 30% to 50% • Ownership

In optimistic scenarios, sales growth of 200% to 300% could be achieved,

Transforming Kirana Stores to Drive Economic Growth 27

5 Note: The store archetypes are directional

Transforming Kirana Stores to Drive Economic Growth 28

Young & Savvy • Self-owned business started few

Transforming Kirana Stores to Drive Economic Growth 30

Transforming Kirana Stores to Drive Economic Growth 31

A self-serve format store provides

Transforming Kirana Stores to Drive Economic Growth 32