What would be the key insights that your research can provide to FMCG manufacturers in India? © 2018 – Indian School of Business (ISB). Increasing urbanisation, increasing incomes, and rising aspirations for a better quality of life are reshaping the Indian retail space.Most FMCG manufacturers do not picture the Indian retail landscape this way and often either disproportionately allocate resources depending on the size of the city or extensively focus on strengthening their supply chain and sales infrastructure in large cities rather than building new supply chain and sales infrastructure in the rural areas.Another common mistake most global FMCG manufacturers make in India is to ignore the traditional kirana stores. All classes of cities are growing equally when it comes to profitability for the FMCG manufacturer. In many cases, several stores from the same chain do business in neighboring areas. Patil, A., Borle, S., Singh, S., 2018. Understanding how the intensity of promotions in one category affects that category and other category revenues is important for an effective and profitable promotion campaign. As the kirana stores are still accustomed to the traditional food basket requirements, customers look for grocery supermarkets for the additional supplies. Most FMCG manufacturers do not picture the Indian retail landscape this way and often either disproportionately allocate resources depending on the size of the city or extensively focus on strengthening their supply chain and sales infrastructure in large cities rather than building new supply chain and sales infrastructure in the rural areas. Use with the store assets you already have. Several retailers are planning collaborative strategies to address this market. What are some of the unique aspects of the Indian retail industry?Siddharth Singh: There is a lot of academic research in Marketing on retailing and most of it looks at the retail industry in North American and European countries. These consumers might not be attracted to organised retail stores. 4 INVENTORY MANAGEMENT. Determine the reasons behind these things, then use those insights to steer your retail marketing strategy. Flipkart now proposes to supply goods to kiranas leveraging the expertise of Walmart India — a cash-and-carry business. Challenges of Managing Conglomerates: Lessons From the Tata Group. From Shubman Gill to Rishabh Pant, young turks of India's historic cricket win in Australia. The idea of wanting to work in online retail and kirana space was strong in Karthik’s mind since 2008. Manufacturers can customise their products based on size or packaging. Majority of the store owners find it difficult to match the requirements as keeping such a large inventory is not possible for them. Big retailers are openly talking of plans to harness the power of big data, even reporting those in annual reports as part of a long-term strategy. This creates a win-win for everybody. Very rarely would you see Unilever India or a Proctor & Gamble offering a 15% extra for their regular 180ml shampoo.Finally, we have the diversity of rural areas and cities of different sizes spread across the country. The results show that the difference in monthly sales to a distributor across different city size tiers, i.e., metropolises, mini-metros and other cities and rural areas is decreasing over time, while profitability is increasing across all classes of cities over time. Third, you often see retailers offering extra price and quantity benefits at the store level like discounts or bundled products. Thus, they lose the business in the long run. Contrary to common belief, the profitability of traditional kirana stores is already higher than that of modern trade outlets. on: function (event, callback) { Flipkart too is reportedly looking to partner with 15,000 kirana stores as part of its strategy to sell smartphones and other products using convenience stores. Bulk purchase always comes with discounts and deals. To get home delivery of your favourite groceries simply: * Choose your nearby grocery store * Select from a wide variety of products including Dal, Atta, Oil, Ghee, Sugar, Noodles, Soaps and Shampoos. The retail industry in emerging economies such as India presents challenges that are typically not seen in these contexts. Rol-a-Cola can be pushed in the rural market by making it an easily available alternative at each kirana store, through a strong distribution network, by increasing the margin for kirana stores and distributors based on volume of sales. Get your visiting cards designed. if (!window.mc4wp) { The promotion in the rural network is through celebrity marketing, with a youthful image (teenage/child actor), catchy jingles on the radio and TV. Manufacturer-led promotions are relatively infrequent. To receive Management Briefs in your inbox, and other special content for subscribers, please sign up. Therefore, a skewed approach focusing primarily on the large cities is no longer justified. These small shops stocks up with vide range of groceries and daily need products like sanitary products, snacks, tobacco etc. Eventually, the entrepreneur realised that the work needs to start from demand aggregation and not supply aggregation beca… That led to the birth of kisan.co, which didn’t take off. The power of Kirana stores has stood the test of time smoothly for centuries, from monarchical ages to 2020. About the Research: Kirana stores and the power of big data. But what is unseen is the enormous consumer goodwill garnered by these stores. A Kirana store is a general department store that stocks and sells all kinds of household items, especially the ones that belong in the kitchen like groceries. Although this strategy seems reasonable and may have worked in the past, our results highlight the need for a more balanced approach. About the Interviewer: (function() { The concept of Kirana stores exists only in the subcontinent of India. This anchors the final retail price for a product. Make sure this place you choose is accessible by people easily. Kirana.One would serve as a directory for local kirana stores or nukkad stores. In doing so, the direct benefits through increased sales are obvious. © 2018 - ISBInsight - Flagship Research Periodical of the Indian School of Business (ISB). The Indian retail industry has certain key features that make it unique. } In the US, the retailer decides the price paid by the consumer but here the MRP is printed on the package. Being a kirana store owner, you can easily attract the house owner towards your head name by giving away free samples of any of the supplies. The learning from the developed world cannot be applied directly to the retail industry in the emerging economies. There are more than 15 million traditional kirana stores in India. Having said that, kirana stores are easy accessible (open for longer hours than organized retail in most cases), deliver at home at convenient time (saving the buyers time wasted in traffic or long queues at check-out counters) and, of course, friendly service where the buyer and sellers know that it a mutually beneficial long-term relationship (you don’t see new faces every time you walk into an organized retail … All classes of cities are growing equally when it comes to profitability for the FMCG manufacturer. Click here to see Forbes India's comprehensive coverage on the Covid-19 situation and its impact on life, business and the economy​, [This article has been reproduced with permission from ISBInsight, the research publication of the Indian School of Business, India], For hassle free instant subscription, just give your number and email id and our customer care agent will get in touch with you, Donald Trump exits White House at a lowest approval rating of his team, How 80/20 helped Simba brew the survival keg in 2020. } Kirana.store is a comprehensive platform to cater to the needs of ever growing needs of consumers. What would be the key insights that your research can provide to FMCG manufacturers in India?FMCG manufacturers can take advantage of the Indian retail landscape and achieve higher profits if they stop excessively focusing on premium products, larger cities and organised retail. Second, the government regulation requires fast moving consumer goods (FMCG) manufacturers to print the “Maximum Retail Price” or MRP on the package of the product. Working Paper, Indian School of Business. Reliance Retail’s e-commerce platform JioMart will soon use Kirana stores as franchise partners to deliver non-perishable grocery items in India, departing from its previous strategy of … Kirana King - Empowering Grocery Retail. However, a strong traditional channel would provide an indirect benefit as well: it would check the power that large organised retailers have over the manufacturer. Kirana.Store emphasizes on quality at reasonable prices to all consumers. He also heads the ISB’s initiative for excellence in media research, The Media Hub. } Is a focus on organised retail justified on the basis of profitability or volume rationales?The traditional kirana stores are here to stay and FMCG manufacturers should not neglect the huge potential of this channel. Thank you for your comment, we value your opinion and the time you took to write to us! Siddharth Singh: There is a lot of academic research in Marketing on retailing and most of it looks at the retail industry in North American and European countries. Don't always crave for new customers, rather it is important that you have more loyal … Manufacturer-led promotions are relatively infrequent. We analysed over a million sales transactions of a large FMCG manufacturer with traditional kirana as well as organised retail channels for over three years. Although this strategy seems reasonable and may have worked in the past, our results highlight the need for a more balanced approach. Data Protection Bill: Can it ensure your privacy online? An Empirical Investigation of Unique Aspects of Retailing in India: The Perspective of Consumer Packaged Goods Manufacturers. In the US, the retailer decides the price paid by the consumer but here the MRP is printed on the package. This results in more selling and also making a decent return, anyway. In doing so, the direct benefits through increased sales are obvious. Ace of Club: How Mahindra Holidays & Resorts rode the Covid storm, US startups struggling to hire when times are tough, News by Numbers: How Indian singles look to mingle in 2021, Timeline: Joe Biden, from youngest senator to oldest president. Increasing urbanisation, increasing incomes, and rising aspirations for a better quality of life are reshaping the Indian retail space. An Empirical Investigation of Unique Aspects of Retailing in India: The Perspective of Consumer Packaged Goods Manufacturers. For FMCG manufacturers, the differences across cities in terms of sales in traditional kirana channel and organised retail channel is decreasing. Netflix will no longer borrow, ending its run of debt, The next Tesla? Unity in diversity – Survival Strategy for Kirana Stores. The traditional kirana channels might have very limited bargaining power due to constraints in assortment, products, price or location. Another common mistake most global FMCG manufacturers make in India is to ignore the traditional kirana stores. Depending on the funds you have available or raised, you can decide the grandeur of your store or shop. Many FMCG manufacturers underestimate the cross-category effects when designing promotions and expect that promotions will lead to higher revenues. “Kirana store owners have taken a beating from ecommerce players over the last few years and are ready to fight back now,” he says. How is the retail industry in emerging markets different from developed economies? However, with consumer preferences shifting to shopping online or at supermarkets and the rise of modern retailers across Tier I, II and III cities, Kirana store owners are facing the music. Posted by Tielman Nieuwoudt. Could you tell us more about this?The traditional kirana channels might have very limited bargaining power due to constraints in assortment, products, price or location. Salespeople should be trained to offer specialised services to build a better relationship. Could you tell us more about this? })(); ISBInsight content is free to read. They plan to tie-up with kirana stores to allow consumers to opt for these local stores as pick up points when they aren’t home. A common mistake is to allocate the advertising budget and sales-force personnel based on the size of the city. Pur-posive sampling method is used in the areas of Baner, Aundh, Pashan, and Pimpri-Chinchwad areas of Pune City. Online Grocery Shopping in Jalgaon, brought to you by Kiranastore.co.in initiative by Live Media Ventures. Mentioned below are the key steps that you need to take in order to build a Kirana store of your own. Walk through a street and you will find more kirana stores than organised retail outlets like Big Bazar or Reliance Fresh. Get in Touch. Therefore, a skewed approach focusing primarily on the large cities is no longer justified.About the Researchers:Ashutosh Patil is Assistant Professor of Marketing, Robert J. Trulaske, Sr. College of Business, University of Missouri.Sharad Borle is Associate Professor of Marketing, Jones Graduate School of Business, Rice University.Siddharth Shekhar Singh is Associate Professor of Marketing and Associate Dean – RCI Outreach and Engagement at the Indian School of Business.About the Research:Patil, A., Borle, S., Singh, S., 2018. Is a focus on organised retail justified on the basis of profitability or volume rationales? Salespeople should be trained to offer specialised services to build a better relationship. Is government's frenzy for world's largest vaccination programme misplaced? Kirana stores have understood that they are an all-season business. The store size of any shop depends on the kind of funds available to a local merchant. callback: callback FMCG manufacturers should train their sales-force personnel to be more receptive to the needs of the traditional kirana stores. A promotion in the pasta category can not only affect pasta sales but also the sales of other categories such as pasta sauce and canned vegetables. Working Paper, Indian School of Business. Manufacturers can customise their products based on size or packaging. As more and more customers are placing orders by phone call, WhatsApp, online … Manufacturers can customise their products based on size or packaging. It will expand the reach of these store by enabling them to cater to a larger area and it will give their customers the convenience to go online or open the app to see the inventory of their nearest store. }); Sharad Borle is Associate Professor of Marketing, Jones Graduate School of Business, Rice University. 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