In India, we are seeing a clutch of VC funded start-ups and large corporate funded efforts to become a supplier to the kirana store ecosystem. This article in The Atlantic explains that such businesses are mushrooming all over the world: “These stores are so mundane that it can be easy to miss the vital role they play in local communities—and the global economy. In the developing world, where Western-style grocery stores aren’t common, many people rely on them for the bulk of their food and other household staples. In India, these kiranas account for more than 70 percent of all consumer purchases. In Indonesia, almost 80 percent of groceries are bought at traditional warungs. Overall, the global corner-store market is worth at least $900 billion.
So it’s no wonder that when the tech industry looks at these shops, it sees dollar signs. Over the past few years, dozens of start-ups flush with more than $1 billion from investors have sprung up to turn mom-and-pop stores into digital retailers and mini–tech hubs. In Egypt, merchants can now restock their shelves using an app; in Nigeria, shops now function as pseudo-banks; and in China, consumers can now pick up online grocery orders from corner stores. Major corporations and even Jeff Bezos are in on the craze—the Amazon founder recently invested in Ula, an Indonesian start-up that has signed up more than 70,000 retailers to its inventory-ordering platform.”
So why has investing in this space become all the rage? As with many things related to tech, Covid has played a role but there is more to it than just Covid: “The earliest start-ups designed to work with corner stores popped up a few years ago, but this market, like so many others, really boomed when the pandemic hit. Lockdowns forced people around the world to start shopping for groceries and packaged goods online—items they used to get at their local corner stores. Tech companies seized the opportunity, offering apps that allowed them to take e-commerce orders, fill their inventory with cheaper products, and make additional income through services like package delivery….
Tech companies are so interested in corner stores precisely because of how common they are. Instead of attempting to replicate the infrastructure and community knowledge that these shops have, why not piggyback off of them? Their proximity to people’s homes already makes them well positioned to help remedy the logistical challenges that tech companies face, such as figuring out how to quickly get packages from a warehouse all the way to a customer’s doorstep. And because smartphones and 4G connections are becoming more widespread even in the developing world, start-ups are banking on the notion that it’s possible to get these old-fashioned shops to adopt new apps and other digital systems.”
Interestingly, there is a variety of business models being used in this space and the article is worth reading in full just to understand how a simple idea (i.e. supplying stuff to the last mile retailer) can result in a plethora of business models. The common theme running across all of these business models is digitising what was hitherto done in cash and by using paper receipts and by placing orders over the phone. As a result, if these business models succeed, a big part of what is currently the informal economy will enter the organised economy. How these small shops will fare in the modern organised economy will determine whether countries like India, Bangladesh, Indonesia and Egypt are able to create an alternative form of retailing compared to what the Western supermarkets pioneered in the pre-digital 1970s and 1980s.
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