Kirana-Tech: The Next Stop In India’s Tech Journey
Pedestrians pass in front of a kirana store in New Delhi, India. (Photographer: Sanjit Das/Bloomberg News)

Kirana-Tech: The Next Stop In India’s Tech Journey

For decades, the local kirana store has provided you with your daily necessities, mostly accepting payment in cash, and accounting for day’s earnings informally come nightfall.

These tiny stores, littered across every neighborhood in India, have survived the onslaught of large retailers and e-commerce giants and are now the target of tech firms as one of the next big opportunities. According to market research agency Nielsen, there are around 12 million kirana stores in the country, accounting for 90 percent of domestic retail and fast moving consumer goods sales.

“Kirana-Tech” is heating up in India as fintechs, aggregator platforms and e-commerce firms look to digitise various parts of the kirana business, said Sanford C Bernstein in their fintech blog dated Feb.14. Authors Gautam Chhugani and Monica Agarwal pointed to Paytm and BharatPe’s focus on merchant payments, together with a variety of new platforms targeting different aspects of the kirana business.

Payments are not the only way merchants are being aggregated. There are aggregating platforms for accounting, inventory, supply chain management (~ OkCredit, Khatabook). And besides, there is the giant in Jio that has been piloting point-of-sale payments and supply chain systems for kirana stores as part of its omni-channel strategy.
Sanford C Bernstein Fintech Blog

Fintechs Meet Kirana Stores

Having captured a good chunk of retail payments, a number of payment companies like Google Pay, Paytm, PhonePe, Freecharge and others are now focusing on payments generated by small merchants such as the kirana store.

Paytm, for instance, launched a new QR-code device with zero fee to get a larger share of the small merchant market, it said in a blogpost last month. The company also launched add-on services on its merchant payments app, such as a digital ledger for recording transactions and sending invoices to customers. Through the app, kirana store owners can also buy third-party financial products like loans and insurance.

PhonePe, on its app, also offers QR-Code based payments. Features like a geo-tagging facility are included. Other services which will be added to draw in merchants include a digital ledger and a credit option, said Vivek Locheb, head of offline business growth at PhonePe.

The adoption of digital payments by small merchants is higher in metros and urban areas. But we have realized that even small towns, where there is a sizeable young population, college students or even IT hubs, exhibit similar adoption to larger towns.
Vivek Locheb, Head of Offline Business Growth, PhonePe

While some payment service providers are focusing on urban areas and larger cities and towns, there are others who are trying for a foothold in rural areas.

One such company is FIA Technology Services Pvt. Ltd., which so far operated as a business correspondent for financial companies. FIA is now using its experience in rural areas to provide payment and other options to kirana stores.

Seema Prem, co-founder of FIA Technology Services told BloombergQuint that the company is currently rolling out QR-code payment solutions in villages across 672 districts in the country. They will also add small loans to their offerings if their application for a non-bank financial company licence is approved by the RBI.

Beyond Just Payments

The kiran-tech story, though, has moved beyond just payments.

Take, for instance, OKCredit and Khatabook both of whom provide a mobile-based khata, or record, which helps small merchants track transactions which were, so far, primarily recorded on paper. Both applications feature a ledger system, reminders and alerts linked to upcoming payments. They can also facilitate payments.

“We want to solve problems that small merchants face,”said Harsh Pokharna, co-founder and chief executive officer at OkCredit. In doing so, the data that gets collected also helps the kirana store, Pokharna said. “Using the data we capture from the merchants, we want to build more services, like finance, through partnerships with non-banks and other lenders.”

Khatabook has a similar objective but also focuses on business-to-business payments. Co-founder Ravish Naresh said that a majority of transactions on the platform are B2B payments, which is an indication that even wholesalers and suppliers are getting digitised. Naresh added that the company is testing out solutions like credit, commerce and software tools, but is yet to formally launch these.

GoFrugal has been active for nearly 15 years but has seen digital adoption in the small merchants segment pick up steam in the last three to four years, said Kumar Vembu, co-founder and chief executive at the company.

In the last three to four years, we have seen a large transformation towards digitisation by small shopkeepers, not only in digital payments but also across the value-chain. Wholesalers want more transparency and by moving away from cash-based transactions they can reduce leakages.
Kumar Vembu, CEO, GoFrugal

Jumbotail connects food and grocery retailers ranging from small kiranas to supermarkets with brands and producers, through a network of fulfillment and distribution centers using a mobile application. “We are building both digital tech and physical supply chain to the kirana stores that enables us to have a much deeper relationship with kirana stores,” said Ashish Jhina, co-founder and chief operating officer, Jumbotail.

Apart from managing the supply chain for these store, Jumbotail’s fintech platform also offers working capital against inventory procured by the kirana store. “This level of full stack solution reduces the risk for the lender,” Jhina said.

Enter, The Big Guys

It’s not just the start-ups that are are targeting the kirana business but also the large retail and e-commerce firms, for whom kirana stores are the last mile.

Amazon recently said it would invest $1 billion to bring 10 million small and medium businesses online and will provide services like e-commerce on-boarding, imaging and cataloguing as well as warehousing.

Asia’s richest man, Mukesh Ambani, recently unveiled a plan to launch an e-commerce platform, called JioMart, which will connect 30 million kirana stores.

Hindustan Unilever Ltd, in a recent conversation with BloombergQuint, said that it has launched a digitisation drive across its current distribution network to improve the speed and accuracy with which goods move from the company’s stock depot to the distributor and then to the retailer.

Harminder Sahni, founder and managing director, Wazir Advisors, does not expect an “overnight transformation” of the current kirana store market despite the attention this segment is getting.

While technology will help kirana stores improve their business practices and formalise their operations, fundamentally these companies will face friction because each store operates as an individual business. They may not want to be part of the larger branding franchise.
Harminder Sahni, MD, Wazir Advisors

He added that payment fintechs may have helped small merchants move to less cash transactions, but that may not have helped these stores become more profitable immediately. “You need other solutions ,” he said, adding that, “in finance at the end of the day, small merchants require loans and better products to help generate greater savings and therefore business investments.”

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