All India Consumer Products Distributors Federation (AICPDF), a body that represents FMCG distributors in the country, has claimed that an estimated 2 lakh Kirana stores have shut down in the last year, due to the rapid expansion of quick commerce along with the economic slowdown. The industry body has alleged that quick commerce players are creating an “unfair playing field” through deep discounting and predatory pricing, eroding the customer base and profitability of Kirana stores. This, along with the economic slowdown, has led to the closures of Kirana stores, it added. 

This comes at a time when leading FMCG players have flagged concerns about sluggish growth seen in general trade channel, which contributes largest chunk of industry sales.

In the past, AICPDF has written to government authorities, including Competition Commission of India, to investigate the business models of quick commerce players alleging violation of FDI norms. On Monday, AICPDF has yet again requested for “urgent intervention” from policymakers to support Kirana stores as they face unprecedented challenges. “Steps to regulate the quick commerce industry and create protections for small retailers are essential to preserve the heritage and economic role of India’s traditional retail sector,” it added. 

The industry body said that Kirana stores in metros have seen the most impact. Nearly 45 per cent of the 2 lakh Kirana stores that have shut down are in metro cities, followed by Tier 1 cities (30 per cent) and Tier 2/3 cities (25 per cent). “The growing presence of quick commerce, compounded by economic challenges, has contributed to this trend, as Kirana stores across all regions struggle to stay afloat, AICPDF added.

“Quick commerce, a sector generating approximately $3.3 b in revenue, has primarily targeted metro markets, where these closures are most concentrated,” stated Dhairyashil Patil, National President of AICPDF. “This rapid expansion is eroding the customer base and profitability of Kirana stores that have served as the backbone of India’s retail sector for decades,” he added. 

“Deep discounting, combined with predatory pricing, has created an unfair playing field, eroding the customer base and profitability of Kirana stores that have anchored our retail landscape for generations,” Patil added. He said these aggressive practices, “coupled with the economic slowdown, are forcing many traditional retailers to shut stores.” The body claimed that about 90,000 Kirana stores in metro cities, 60,000 in Tier 1, and 50,000 in Tier 2/3 cities have had to shut shop.

India has about 13 million Kirana stores nationwide. Metropolitan cities account for 1.7 million, Tier 1 cities hold 1.2 million, and Tier 2 cities and beyond comprise 10.1 million stores.

The industry body said that its analysis has revealed that Kirana stores are facing economic pressures from various fronts. One one hand they are witnessing “drastic reduction” in consumer footfalls, which have nearly halved in the past 203 years, on the other hand high rental costs are also making it difficult for Kirana store operators to break even.“ Despite the festive season with major events like Dussehra and Diwali, sales remain stagnant. The festive boost, usually seen at this time, has yet to materialise, with Diwali set to start on October 28,” AICPDF stated. 

Last week, a report by Elara Capital noted that distributors on the ground are unable to recover dues from Kirana stores due to the negative impact of digital platforms including quick-commerce players on Kiranas. “ Kirana stores are sitting with high levels of inventory and distributors are unable to receive money on time. Emergence of modern trade did not see a big negative impact for Kirana stores, as the former is led by bulk buying whereas Kirana stores were always for impulse consumer buying. However, emergence of qCommerce companies could make a bigger dent, as buying for impulse verticals and products may see strong growth via qCommerce platforms, moving away from Kirana stores,” the report had stated.

Published on October 28, 2024