among other things. And Amazon is in talks with Reliance Retail’s parent company to buy up to 26 per cent of the local powerhouse. The ultimate in thinking local In a country where food habits and cuisines change every 50 to 100 kilometres, kiranas provide easily accessible, locally relevant assortments, often tailored to individual customers and with special items and quantities purchased on request. Kiranas usually provide free delivery in less than an hour from texted customer orders, and most provide credit facilities for regulars. Kirana shopkeepers build personal relationships with customers, knowing them by name, and serve as a contact point for and a pillar of the local community. Many are the delivery point for customer parcels and mail. Their small store footprints, often around 100sqm with a closed counter, mean that the kiranas keep minimal inventory – typically only a few hundred SKUs turned over smartly – and use the wholesaler as their warehouse. Despite small order quantities per store, they are the largest and most important channel for FMCGs. However, many have dim and disorganised interiors, most only transact in cash and use a physical book system for inventory. They are ripe for operational improvement, if not reinvention. A protected species Despite protracted lobbying by global retailers, the Indian government has been reluctant to open its market to foreign competition due to fears that it may adversely impact kiranas. Amazon and Walmart-owned Indian e-commerce platform Flipkart are subject to regulatory restrictions. Government regulation requires FMCG manufacturers to print the maximum retail price  (MRP) on the package of the product, meaning shopkeepers cannot compete on price. Some are, therefore, experimenting with bundle deals and loyalty programs. The November 2016 currency note ban, which removed 80 per cent of the currency value in circulation, has pushed small shopkeepers in the direction of mobile payments in a market where 350 million to 400 million of its 1.2 billion consumers are expected to be digitally enabled by 2020. And the 2017 introduction of a GST has made manual billing and cash transactions more complex. Enter the big boys and the startups. Digitising the corner store Kiranas are digitising in a number of areas, including POS systems, payments, inventory systems, and back-end integration with wholesale suppliers. And digitisation is resulting in additional revenue streams for kiranas, including from deliveries and commissions from payment providers. Earlier this year, Reliance Retail announced plans to enter Indian e-commerce to create “the world’s largest online to offline e-commerce platform” for ordering inventory and databasing customers as well as participating in a rewards program and securing short-term loans. It has launched incentivised trials in kiranas in a number of Indian states for stores to perform last-mile deliveries. Its current one-time price point of A$1000 may limit the market to Class A and B stores turning over A$20,000 per month, but as price points come down, reach is anticipated to grow, with the Reliance looking to expand the current digitised store base from 15,000 to more than five million by 2023. Given its current customer base of 300 million via its Jio communication services and 700 million via its established retail footprint of 10,000 stores, it will be able to assist kirana shopkeepers to acquire customers. Reliance is also pursuing a partnership with India’s largest FMCG company, Hindustan Unilever, to acquire merchants. Germany’s Metro Cash & Carry is currently working with 500 kiranas. It provides a monthly instalment dashboard-based POS solution for tracking inventory, sales, revenue, cashflow and profitability as well as GST-compliant invoicing and a communications platform enabling shopkeepers to run text- and email-based promotions for specific customer cohorts. Metro is also offering interest-free credit products to optimise working capital. Metro is also investing in some store fitouts with lighting and removing closed counters to enable self-serve, and installing security cameras. Similarly, Walmart is offering shopkeepers a combination of store fitout and POS solution. Currently trialling in Lucknow, the pilot is expected to expand to 100 stores and subsequently roll out to 200 to 300 stores in selected cities. Walmart’s Flipkart is looking to partner with 15,000 kiranas to sell smartphones and other products. Flipkart’s fashion e-commerce platform, Myntra, already uses kiranas to carry out last-mile deliveries. Walmart is expanding its Best Price wholesale store network to serve kiranas, and unlike Amazon or Reliance doesn’t sell direct to consumers. Best Price is piloting a program to help kiranas sell goods online to their customers, and has a website and app that allows kiranas to order online. Amazon, meanwhile, is arming kirana shopkeepers with smartphones to place orders for local residents. It uses them for last-mile goods delivery in communities that often have no street names or house numbers. It currently has 17,500 small stores across India, mostly in tier-2 and tier-3 towns, in its “I Have Space” (IHS) B2B inventory supply program. India’s POS device market is expected to reach US$3 billion by 2024, so unsurprisingly, the digitisation of kiranas has spawned a number of mPOS and mobile payment providers in an increasingly crowded space. Key players include Snapbizz, Nukkad Shops and GoFrugal.  Snapbizz has over 10,000 kiranas on its platform. For a one-time payment of A$1000, the kirana merchant receives a POS device with software, a screen space for ad displays and an app. Investment is recovered in around six months, with merchant revenues estimated to increase by A$175 per month.  Other POS-device providers include Ezetap, Mswipe, PineLabs, Innoviti, and Payswiff. PayTM has entered the space via a tie-up with Chinese electronics maker Xiaomi. SHOPX has a retail operating system connecting brands, retailers and consumers and a reach of 120,000 retailers. Mobisy Technologies is also connecting retailers to distributors and FMCG companies, with a network of 100,000 retailers. In mobile payments, Google Pay has piloted payment alternatives for kiranas. PayTM claims to have a merchant network of seven million. Flipkart-owned PhonePe is used by over five million small businesses, predominantly kiranas, and is on track to become India’s next unicorn. Setting the global standard Although not without challenges – including technical, policy reform, geographical and not least technophobic merchants who want to retain control and choice over the products they range – kiranas are seen as the next retail channel to become digitally enabled and expected to reach an inflection point in the next two years. While according to data consulting firm RedSeer only 3 per cent of kiranas are tech-enabled, 70 per cent of kiranas in big cities and 37 per cent in tier-2 towns are willing to use technology to manage their businesses. Kiranas are now the subject of modernisation for efficiency, supply chain transformation, and a source for democratising e-commerce and digital payments by leveraging their community relationships. A key part of major retailers’ strategies, rather than killing kiranas the involvement of the major players means that they are expected to remain 80 per cent-plus of Indian retail for the next five years.In the medium term, India’s kiranas could possibly become the global standard for hyper-local small-format grocery stores.