Local Kiranas, Mom & Pop Stores Are Here to Stay! The Xirify Thesis

The world of quick commerce has been buzzing with excitement. Everywhere you turn, there's talk of acquisitions, new initiatives, soaring share prices, and the age-old debate between Dark Stores Vs Marketplaces. Underlying all these, one fact remains constant: the Indian consumer market has immense potential and is rapidly evolving, driven by changing consumer preferences, technological advancements, and emerging market trends. In a recent article, Hemant Bardi shed light on Flipkart's approach towards quick commerce, emphasizing the significance of collaboration with local kirana stores over establishing dark stores.

Mr. Bardi's insights resonate with ours.

The article highlights the growing recognition of the invaluable role that local stores play in the e-commerce ecosystem. And let me tell you, it's a trend that's here to stay.

But why all the hype about local kiranas? Isn’t the market going to get monopolized soon just like what happened in the western countries? Well, for starters, Kiranas and Mom-Pop stores are the backbone of our communities. These small businesses have been serving customers for generations, offering personalized service and a sense of familiarity that's hard to replace.

Here are some key points based on our pilot operations in Pashan with 200 Merchants from 15+ categories and 2.5K active shoppers:

• Doorstep Delivery Boosts Orders: Adding Doorstep Managed Delivery Service saw our Order Per Day increase by 5 times. Contrary to our initial assumption that shoppers prefer self-delivery from local kiranas, we found that customers are willing to pay extra for a more efficient, trackable, and hassle-free delivery service.

• It’s Not About Impulsive Buying: Our focus on Daily Needs from the beginning is showing some different signs. We handpicked merchants in the 3 operational pin codes, ensuring we had popular Daily Meal providers, grocery stores, and fruit & vegetable sellers. This strategy increased our Per Shopper average order from 2 to 7, with 90% repeat shoppers, and almost 20% shoppers depending on Xirify for their daily needs.

• The Symbiosis of Online and Offline Enhances Loyalty: Customers appreciate the blend of personalization and familiarity from known and trusted businesses, along with the professional support and trackability of orders provided by tech. This hybrid model enhances customer loyalty for both (The Merchant and the Tech Service Provider). According to a report in The Hindu Businessline, “77% of Indian shoppers prefer to shop with a retailer that has both a physical and online store”.

• Multicategory Approach: Shoppers tend to stick with an app if the item/products they are looking for are available and the price is reasonable. By catering to diverse merchant categories, we increase customer CLV and profitability by focusing on customer needs.

• Cancellation Matters: Order count reduces drastically if Shoppers face cancellations or order edits (Why business should avoid cancellations).

In short, there's a growing appreciation for the simplicity and reliability of shopping at your neighbourhood kiranas powered by technology. As our Mentor Mr. Mohan Bangaruswamy says, “None of the quick commerce business will ever replace brick and mortar. Anyone who thinks this will happen has to examine their assumptions. People may use multiple channels -- almost everyone in my community shops in brick and mortar and utilizes multiple online businesses depending on their need, mood, and whims.”

But the future is not just about nostalgia, discounts, or 15min delivery – it will be about real value and innovation. Here at Xirify, by leveraging the existing infrastructure and expertise of local stores, we are able to offer faster deliveries, better customer service, and a more diverse product selection to our shoppers. It's a win-win situation for everyone involved – from the customers who enjoy a seamless shopping experience to the neighborhood business and Local Kirana store owners who benefit from increased reach and reduced overhead costs through digital integration.

But let's not stop there – let's talk about the power of innovation. As a part of Xirify and deeply involved in its strategy and customer interaction, I've seen firsthand how innovation can transform the e-commerce landscape. A simple change of navigation or cataloguing can instantly impact the unit economics. For example, adding well-thought-out add-ons with every product has helped us increase our (Xirify’s) AOV from Rs. 240 to close to Rs. 300 in a matter of days. In the article “Flipkart's Hemant Badri to lead quick commerce foray, plans kirana tie-ups instead of dark stores,” I particularly liked the phase where they quote “Indians will graduate from unorganized retail to quick commerce.” Quick commerce is already a $5 billion market, according to Goldman Sachs.

The article goes on to say that the sector already represents around 8 percent of the e-commerce industry and is poised to account for 20 percent of the market by the end of FY29, as per analysts at UBS. However, keeping the ‘Online Kirana Model or The Marketplace Model’ at the centre, innovation for inclusivity in increasing customer base, loyalty, stickiness, and high CLV (Customer Lifetime Value) and keeping the operation “Low Cost” is going to be key to actually “graduate from unorganized retail to quick commerce”. Today, we have the advantage of technology from AI-powered recommendation engines, natural language processing, AI powered search, support to voice-activated shopping assistants; the possibilities are endless.

For example, innovation can empower the visually impaired: Consider the significant segment of visually impaired individuals whose daily lives could be greatly facilitated through innovative technological solutions. It's a common scenario in many households where elderly members refrain from using mobile apps due to difficulties in navigating catalogues. This untapped market represents not just the aging population but also the 70 million visually impaired individuals in India. By leveraging advancements in artificial intelligence (AI) and voice command technology, there is potential to simplify the ordering process for this demographic, thereby opening a vast market segment.

So, here's to the future of e-commerce – a future where local kiranas and mom-and-pop stores reign supreme in collaboration with Online Marketplace/Technology Platforms. It's evident that brick-and-mortar stores will continue to play a vital role in the retail landscape, complementing the online shopping experience. We have seen Reliance's strategic emphasis on collaborating with local kirana and supermarkets, reflecting this recognition of the symbiotic relationship between offline and online retail, and now Flipkart wanting to walk the same path.

Moving forward, the success of e-commerce ventures will hinge on our ability to innovate, adapt, change, and deliver value to consumers in an ever-evolving, competitive market. It's a future filled with opportunity! However, there will be challenges for every type of player in the ecosystem. Smaller players will face the challenge of funds/resources while bigger players will face the challenge of agility, legalities, brand, etc. VCs will continue to play an important role in keeping the segment innovative; initiatives like ONDC will also play a big role in shaping the segment (Oh! Tata Neu is betting big on ONDC).

In a nutshell, the Indian e-commerce segment stands at a critical juncture, poised for exponential growth, and the fuel for this growth will be innovation, collaboration, personalization, and a deep-rooted understanding of consumer (Local Merchants and Shopper) needs.

Cheers to the future!