Evolving Through Tech: How Data Science Is Reinventing Kirana Stores

Samarth Agrawal Sep 30, 2020

For Indians, kirana stores have always been an integral part of our lives, especially during our childhood. Running down to the nearby kirana store to grab a last-minute purchase will always be a fond memory. Today, while there are over 12 million kirana stores scattered across the country in nooks and corners of both metro cities, suburban and rural areas, a significant percentage of the urban population has shifted to online ordering of groceries from big supermarket chains. The advent of technology has been the core element in driving the recent e-commerce boom, and the pandemic has only spurred this growth further.

Kirana stores are also not behind when it comes to technology adoption. Small stores across the country are now jumping on the tech bandwagon by incorporating cutting-edge innovations such as AI, ML, and data science which has been the key to unlocking the potential of kiranas. How? By partnering with B2B e-commerce platforms that act as aggregators. Leveraging data science, these aggregators are transforming kirana stores, making tech-savvy kiranas the way forward. Data science has played an instrumental role in helping kiranas discover their potential and scale their business by increasing operational efficiency. Let us take a look.

There are 5 key areas where Kirana Stores are adopting technology

1. Digital Payments

2. Online selling

3. Procuring Supplies

4. Inventory management through POS

5. Working Capital

Of these, 4 areas, – digital payments, online selling, procuring supplies, and working capital have witnessed unprecedented growth. However, inventory management tech has been an area that is significantly lagging when it comes to kirana stores. To understand better, let’s delve deeper.

Digital Payments

95% of a Kirana store’s transactions are below Rs 200. Receiving cash (both notes and coins), counting, and returning the balance to the customer is a majorly time-consuming activity with low reward or return-on-effort. To address this, kirana stores have now switched to digital payment methods that are more convenient and secure. This generated a treasure trove of transaction data that unlocks potential for usage patterns in retail outlets.

Online selling

The buzzword in today’s retail is Omni-channel selling. Much like their supermarket counterparts, kirana stores have also begun to explore options to sell their goods online through various mediums such as taking orders via WhatsApp. A few have even tried developing and launching websites for their customers. However, the major challenge is in managing the online listing of thousands of products and their prices on a day-to-day basis. It is nearly impossible for a kirana store owner to do this by himself. This is where data science comes into the scene. Additionally, AI and ML processes can enable retailers with data-based management of their online stores via automation.

Procuring Supplies

98% of India’s kirana stores are managed by a single person. This means that they can either manage the store and the customers present in the store or interact with suppliers over the phone which means that there is a potential risk of losing customers. To bridge this gap, more and more kiranas are turning to mobile apps for the procurement of goods daily. This offers them access to a wider selection of products without having to increase their working capital. Besides, these data-driven supply systems are up to 5-7 times quicker in terms of delivery and are often more affordable than their offline alternatives. It also enables Kirana store owners to utilize their night time after store closing to plan their inventory requirements for the next day.

Working Capital

Kirana stores have always relied on working capital to run their business. More often than not, kiranas are stable businesses and serve the neighborhood for decades while having a high turnaround of their capital regularly. To help them scale further several lending businesses are leveraging cutting-edge technology and alternative data sources to underwrite the working capital loans and to quicken the credit processes to kirana stores.

Inventory Management through POS

Unlike western countries, POS terminals never picked up in India. Since more than 95% of transactions at a Kirana store are below Rs 200, customers seldom expect, ask, or wait to receive a proper bill of the sale generated by a POS machine. Instead of bills, the customer prefers some 5%- 10% cash discount on their purchase from the nearby store with whom they have built a rapport and a certain level of trust and understanding with over the years.

Another reason is that kirana stores are highly savvy when it comes to space management. On the contrary, POS terminals reduce available space on the billing counter by taking up too much space and slowing down the billing process since store owners are extremely quick and accurate with calculations. There is no need for refilling paper rolls for the printer, of keeping the prices updated in the POS machine all the time which is another hassle.

Additionally, Kirana store owners have a habit of rounding off the final bill which translates into a 5- 10 rupee discount for the customer which a POS terminal does not do. To add to that, the POS terminals require an upfront investment of a few thousand rupees and annual maintenance too to keep them in perfect working condition, thus preventing store owners from investing in them.

Supply Chain management

For any business, particularly businesses in the retail industry, inventory is fundamental. Kirana stores, however, tend to face numerous challenges when it comes to sourcing and managing their inventory. For instance, poor inventory management can result in overstocking which leads to wastage of goods, or stocking out, which can potentially reduce the customer base of the store. To help kiranas expertly manage their inventory, B2B e-commerce platforms are offering a plethora of services using data science with real-time updates, a simplified process of sourcing inventory, and even next-day deliveries. This helps stores reduce stockouts, increase the variety of goods while maintaining the same level of inventory, and reducing damages, overall improving customer satisfaction.

Optimizing the 3Ps: Products, Price, and Procurement

Indeed, data is the king for businesses in today’s fast-changing world. Gone are the days when kirana stores had to manually assess consumer preferences and behavior and source their inventory according to that. With the right data, kirana stores can discover the latest product trends in the market and compare prices to optimize costs. Additionally, they can also set up notifications of availability on their devices such as smartphones or desktops, thereby increasing procurement efficiency.

Customized recommendation

Every kirana store might have a different requirement based on a slew of factors such as location, consumer preference, size of the store, etc. Data science helps aggregators analyze this varying requirement and recommend products by going through purchase history, items browsed for, items in the shopping cart, and items bought by others in the same cohort. Such intricate customization makes it easier for stores to procure their inventory without having to search through thousands of goods in various categories. Aggregators have also introduced machine learning-based recommendations to helps kiranas discover relevant products that suit their requirements to make the process highly efficient by saving time, energy, and effort.

Automated updates and consignment tracking

One of the most convenient functions brought about by technology is automated updates. Without having to constantly follow up to procure their goods, kirana stores can now set up automated updates and can also opt for enhanced real-time tracking to make the process faster. Access to accurate data has been a boon when it comes to reducing overlap-buying. Driven by data, aggregators kiranas can now keep a track of their purchases from any platform to avoid overlap buying from multiple vendors, thus saving cost and eliminating wastage.

Access to structured credit

Last but not least, access to proper credit facilities is something kirana stores find challenging. Particularly for stores in tier-II, tier-III cities, and rural areas, access to structured credit is unavailable. This often forces them to turn to informal sources of credit such as local money lenders who may charge unreasonably high rates of interest. Novel technology has made it possible for transaction history to be viewed, helping kiranas avail credit from authorized sources, freeing them from the clutches of money lenders. With sufficient data, kiranas can also experience a reduced cost of capital by paying daily interest rather than monthly, easing their financial burden.

All of the aforementioned is possible only through technology, and data science has been remarkable in reinventing the way kirana stores function. It will continue to evolve over the years, bringing us more noteworthy developments and propelling the growth of tech-savvy kiranas.