Frontier Markets Retail Network: Kirana Shops

One of the biggest challenges of bringing products to the people is understanding the channel to reach the households. There have been tons of innovative approaches to bring products to the people in the past, we want to focus on the oldest channel - Kirana Shop.



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Which Kirana Shop?

The Kirana Shop comes in various sizes - for our purpose, we will focus on the Kirana Shop providing products for the BOP. This Kirana Shop has an owner who is a local member of the peri-urban slum or rural village. Usually, a family business, husband and wife are working together at the Kirana Shop where they stock 10-30 products for local households.

What does the Kirana Shop Stock?

The products range from soaps, to sache shampoos, hair oil, agarbatti, beedis, cigarettes, matches, biscuits, washing powder soap, tea, sugar, to some fresh produce. They have been stocking similar products for as long as they started their business because they respond to their neighbors' demand, as well as assess their capacity to stock a product for a period of time.

The Kirana Shop Owner is not like your typical supplier or retailer. While they too believe in margins, and try to understand trends, they are always willing to try new products if they feel their neighborhood demands it. They know their consumers inside and out. They are also extremely risk averse because of their capacity to invest in new products. So the question is, how to break their aversion?

By showing them the demand potential...

By marketing to women in MFI centers, we are able to introduce them to products that they have not directly encountered. (Direct = in person, in their daily life, as compared to an advertisement on tv). If they like the product, they want the product... we introduce them to their retailers who will provide them with that product.

Frontier Markets' target was to approach 10-12 kirana shops to place products for MFI members to purchase. We placed at 25 kirana shops who were happy to try a new product in their store knowing the demand was apparent since MFI members approached their stores asking for specific products.


Kirana Shop - The Local Retailer

Kirana Shops are THE supplier of non-medical products for the semi-urban and rural bop. Their products are usually FMCG (Fast Moving Consumer Goods) based because they are affordable for their target consumers. The most expensive product is usually rs. 15-20 which is the colgate toothpaste, and least expensive is ps. 10 which is a sachet or candy.

Kirana Shops cater to all types of consumer:

Children: biscuits, candy, pens, notebooks

Women: shampoo, soap, powder, hair oil, agarbattis, some produce, masalas, tea leaves, cooking oil

Men: beedis, cigarettes, matches

Usually, they re-stock their products on a weekly basis; the method simply being visiting their local distributor with a list of products and collecting them. Their sales reporting and inventory management is usually a piece of paper with names of products. When asking them how they keep track of what products they need to refill, a typical response is "When it seems to be less, I go to the shop to get more." While this may seem to be an irresponsible way to inventory management, they are very well aware of which products need high volume storage, and which products can be kept in small bulks.

A kirana shop, or retailer's margin ranges from 10-12%. They are advised by the local distributor on price points - selling the products at the assigned MRP. The distibutor takes a 2-5% margin when selling products to retailers. Depending the product, and the company's preference, a retailer either pays upfront, or has 5-7 days to pay for their stock. This leeway allows for more movement of the product, and naturally, risk for the retailer. This is the number one reason a kirana shop owner does not like to try new products unless there is an obvious demand for that product.

This does not mean that Kirana Shops do not test new products. If there is a solid margin, and they have heard of the product, they will give it a try - as long as they do not have to pay upfront costs. (which usually means, a new type of soap, or hair dye - in line with FMCG products) Many local distributors recieve new products from their manufacturers who encourage trial sales before they order large volumes of product. If Kirana Shops are successful in selling the product, they will then place larger orders to stock.

KiranaShops also promote products for companies. For example, when Airtel penetrated rural India, many Kirana Shops kept Airtel boards in their shops. If they like the product, they are willing to promote and advertise on the company's behalf.



Kirana Shop Owners are trusted in their neighborhoods. Most households have their favorite kirana shop they visit. When asked why customers come to their shop, they usually answer, "I have been here the longest." or "I let people pay me back later." or "I carry the products that people want."