The shutdown of approximately 200,000 traditional neighbourhood Kirana stores in India over the past year is alarming and has substantial repercussions for the nation’s economy, inclusiveness, and retail ecosystem.
Alouk Kumar
The closure of around 200,000 traditional neighbourhood Kirana stores in India has significant implications for the country’s consumption economy and inclusiveness. This shift affects employment, supply chains, consumer dynamics, local economies, and community relations. Additionally, it increases the dominance of organised retail, pressures FMCG companies, creates digital divide challenges, affects access to informal credit, decreases demand for local produce, and raises distribution costs.
While organised retail and e-commerce growth offer benefits, policies are needed to support and modernise Kirana stores, ensuring they remain a backbone of the Indian economy and contribute to uniform development and inclusiveness. This situation is particularly concerning as the retail landscape shifts towards organised and digital formats, commonly referred to as Quick Commerce.
Significant Loss of Employment
Kirana stores are predominantly family-run and provide livelihoods to millions of small shop owners. On average, each store supports the livelihood of six people, affecting not only the store owners but also the workers and support staff who depend on these businesses. This situation has the potential to disrupt the entire ecosystem, impacting inclusivity, which is crucial for uniform development and growth in any economy.
Ripple Effect on Supply Chains
Many local suppliers, farmers, and transporters depend on Kirana stores for sales and distribution. The closure of these stores disrupts the informal supply chains they sustain, causing significant economic ripples.
Dependence on Large Retailers and E-commerce
With the closure of Kirana stores, consumers are shifting towards organised retail and e-commerce platforms, leading to higher prices over time due to decreased competition.
Loss of Personalized Service
Kirana stores are known for their community-based, personalised service, credit facilities, and customer trust. This level of service is challenging to replicate in larger stores or online platforms, potentially alienating customers who rely on these advantages.
Effect on Community Relations
Kirana stores are embedded within communities, reinvesting earnings locally and supporting neighbourhood-level economic circulation. Their closure limits local financial flow and reduces microeconomic activity. These stores are integral to community interactions, with store owners often knowing customers personally and offering credit to those in need. Their absence diminishes the social fabric of communities, especially in smaller towns and rural areas.
Market Consolidation
Organised retail and e-commerce giants dominate the market, resulting in reduced competition. This consolidation may limit consumer choice and potentially lead to monopolistic behaviour in pricing and product availability.
Pressure on FMCG Companies
Kirana stores account for a significant share of FMCG (fast-moving consumer goods) sales in India. A reduction in Kirana stores pressures FMCG companies to rely on fewer retail channels, potentially disrupting their sales and pricing strategies.
Digital Divide and Financial Inclusion Challenges
While digital transformation is advancing, many Kirana stores, particularly in semi-urban or rural India, may not have the resources to pivot to online or digitally integrated sales models. This divide could push many out of business as tech-savvy consumers lean towards e-commerce.
Credit Access and Financial Marginalisation
Many Kirana stores provide informal credit to their customers, a service rarely offered by large retailers. The decline of these stores could marginalise those who depend on this credit system, impacting the informal economy and leading to greater financial exclusion.
Decreased Demand for Local Produce
Kirana stores play a crucial role in selling locally sourced produce and goods. Their closure could reduce demand for local products, forcing smaller farmers and producers to rely on corporate channels where they may not receive fair prices.
Rise in Cost of Distribution
Kirana stores are key players in the last-mile delivery of essentials, particularly in rural and semi-urban areas. With fewer stores, the distribution cost may increase as organised retail chains need to invest more in logistics to cover underserved areas.
Conclusion
While the transition towards organised retail and e-commerce has advantages, the potential disappearance of Kirana stores highlights the need for policies to safeguard small businesses. Initiatives to help Kirana stores modernise, digitise, and integrate with new retail models may allow them to coexist with organised retail, sustaining their role as a backbone of the Indian economy. To achieve uniformity and inclusiveness, it is crucial to save the dying Neighbourhood/Mohalla Kirana Stores. Their preservation is vital for maintaining the economic and social fabric of communities across India.
