India currently has more than 14 million Kirana stores (Mom & Pop stores) which accounts for about 85-90% of the retail sales. Currently they trade in around 4200 SKUs dealing with 300 local distributors operating at a gross margin of close 8-10%.
However their ordering, supply chain, inventory management and operations is unorganized, impacting several key areas like Availability, and shrinkage. It is estimated that at any given point of time kirana stores have availability issues upto 40% and have shrinkage of more than 12%. This not only results in lost sales, but also has impact on the profitability of the store. To resolve the above issues, kirana stores need warehouses to store inventory, technology and processes to manage them and substantial capital to sustain them; this is something that they cannot afford and have no knowledge about. One of the other issues faced by kirana stores are the very low credit period and low margins extended to them by distributors resulting in very low profitability. Currently, 90% of the vendors offer a 7 day credit periods with others insisting on a delivery on cash basis. This stops the capital growth due to which a kirana store cannot grow their scale of business, and makes the entire unorganized retail industry very unattractive.
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