Neighbourhood Kirana Stores

                                                       
It was just out of sheer curiosity of how the business thrives that I stepped into a local kirana shop in Adyar, Chennai.  In times of heated debates about FDI in multi brand retail, it is just natural to be curious about what makes the local kirana stores thrive in India.

I would like to share my experience of interaction with the owners of a local store and my own observations. We have often gone to stores like this but have seldom thought about how it operates and how they make profit. 

Background of owner:

As with almost all kirana stores, this is also a family run and managed shop. The shop is being operated by Mr A. Baskar and his brother Rajan. They have been running this shop for almost 10 years now. Before setting up the business they had worked in three other shops for almost 10 yrs to gain business knowledge and learn business practices.

Customer base:

The shop caters mainly to the neighbourhood. Most of the customers are regular customers. Hence, they have a better understanding of consumer preferences. The main reason that the business is thriving is the trust that they have been able to establish with the customers. This shop has a monopoly in supplying water canisters to the whole neighbourhood which always keep them visible to the customers. They also have a system of home delivery even for small number of items which is one major advantage as compared to supermarkets and helps in retaining customers. Even though there is Reliance fresh and Cee Dee Yes(supermarket chain) on both sides of the store within 100 mts, there is no shortage of customers for this small shop.

Employees:

There are four workers in total. They mainly assist the shopkeepers in home delivery of goods. For a water canister they get Rs 5 for home delivery. The owners also have one more person to assist them in the shop who also happens to be a distant relative of theirs.

Business:

These are some of the inputs that I got about the business.

-          There is a business of around Rs 30,000 per day.

-          Margin on food items  - around 7.5%, cosmetic items -8%, biscuits -9%. They give around 5% discount on every product. On an average, they make a margin of around 5% of total business after deducting the expenses.

-          They procure the food items like chilli, garlic etc from the wholesale market in Parris. Other items are supplied to the shop. They buy most of the items on a one week credit. The products can also be returned once the expiry date is over.

-          Business Timing : 7.30am-11.00 pm(Monday to Saturday), 7.30-1.00(Sunday). According to the owners the revenue earned is less compared to the amount of time and effort they put into the business.

Problems Faced:

-          One of the problems they face is the difficulty in getting helpers for their shop as there are plenty of opportunities for a better job in the city.

-           They are also facing space constraints for shortage of area to expand in future.

-          There is no billing machine in the shop. Though, the shopkeepers are fast in calculations, it is unnecessarily consuming a lot of time when the number of items are more.

-          There is also stiff competition from big retail chains like Reliance Fresh. Though the sales are growing it is at a much lower rate than modern trade. They also have to offer discounts to retain their customers which in turn reduce their margin though they are not capable of eliminating wholesalers from the chain.

Neethu Varghese T
FT13446