Mission ONDC: Democratizing Kiranas

Mission ONDC: Democratizing Kiranas

Digitalization and Open Network for Digital Commerce (ONDC) would help midsize kiranas increase take-home profit by around 13 to 15 percent!

By Vaishnavi Gupta, Assistant Editor

Jul 10, 2023 / 5 MIN READ

In India, the grocery sector accounts for 35 to 45 percent of consumer spending. The industry plays a significant role in conveniently fulfilling the daily needs of the country's population. In fiscal year 2022, the Indian grocery sector totaled approximately $400 billion - a figure projected to grow at a CAGR of 6 percent over the coming years.

However, the country’s online grocery penetration is just 1-2 percent, substantially lagging behind other product categories like electronics and fashion. However, the landscape is experiencing a twin disruption with the market becoming more organized and digitalized.

It is in this scenario that ONDC has put its foot forward to accelerate the momentum by digitally enabling local kiranas and putting one of the world’s largest fragmented trade bases at the heart of India's digitalization story.

Challenges Faced by Kirana Players

In recent years, e-grocery received a further boost with the pandemic forcing people to stay at home. As multiple digital commerce platforms evolved, focusing on customer acquisition to growing transaction frequency, a thriving supply and delivery ecosystem emerged with multiple modes. For instance, customers can now choose 1-2 days warehouse-based delivery, or they can opt for quick commerce delivery (within 1-2 hours) through players who have emerged either as extensions of online food delivery or standalone operating from hyperlocal dark stores.

Despite this upward swing, the share of digital commerce in the Indian grocery industry remains low, compared with other global markets such as China (19 percent), the United States (11 percent), and the United Kingdom (13 percent).

This limited penetration is unsurprising - India's 12 million Kirana stores offer a convenience that is hard to match, along with a personalized shopping experience built on close, enduring customer relationships. Around 65 percent of grocery sales come from daily top-ups and impulse purchases, whereas these purchases drive only 25 percent of e-grocery sales. This journey has not been digitalized beyond the top 20 to 30 cities in India.

Path to Change

Digitalization and ONDC could help midsize kiranas increase take-home profit by around 13 to 15 percent. This boost could be attributed primarily to a 20 to 25 percent growth in top-line revenue due to rising hyperlocal demand.

“The network can enable customers to purchase choice products from a seller located anywhere in the country. Ramping up digitalization with local kiranas could transform the momentum of e-grocery in India. With a strong focus on enablers for digital commerce, ONDC could unlock this immense potential for the country's economy and people,” said ONDC.

“It is important to acknowledge that while modern retail formats are here to stay and grow, kirana stores are the fabric of the Indian grocery ecosystem. Even during the challenging times of Covid, the neighborhood kiranas showed their resilience and agility in modifying their assortment, managing the broken supply chains, and continuing to serve the customers. ONDC holds the promise to transform India's e-commerce sector by creating an opportunity for millions of kiranas to participate in the digital economy. We believe that ONDC will foster innovation, collaboration, and inclusion in India's digital commerce ecosystem,” added Kedar Lele, Executive Director – Customer Development, Hindustan Unilever Ltd.

In India, the grocery sector accounts for 35 to 45 percent of consumer spending. The industry plays a significant role in conveniently fulfilling the daily needs of the country's population. In fiscal year 2022, the Indian grocery sector totaled approximately $400 billion - a figure projected to grow at a CAGR of 6 percent over the coming years.

However, the country’s online grocery penetration is just 1-2 percent, substantially lagging behind other product categories like electronics and fashion. However, the landscape is experiencing a twin disruption with the market becoming more organized and digitalized.

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