Sustainability hurdles for neighbourhood grocery stores

The Khasi Hills Autonomous Council recently blocked the entry of a quick-commerce giant to safeguard the livelihoods of over 4,000 local grocery shops, reviving the issue of sustainability challenges for traditional neighbourhood grocery stores. Without innovating digital adaptation to retain customers, rapidly changing consumer choices will continue to be affected by e-commerce and quick-commerce shocks. The consumer choices of buying groceries and other goods are rapidly changing as e-commerce and quick commerce are expanding in the gig economy. In addition to the flexibility of doorstep delivery through online orders and the convenience of a cashless digital payment system, the wide range of products offered by e-commerce and quick commerce companies draws consumers away from neighbourhood grocery stores. The primary concern is that the replacement of grocery shops with hubs of e-commerce and quick commerce leads to a loss of livelihoods for grocery shop owners and salespeople, creating an economic wall that hinders the expansion of digital platform businesses. Yet, the creation of new livelihood avenues in the e-commerce and quick commerce value chain, such as gig riders as delivery partners, store managers, inventory specialists, pickers and packers, fleet supervisors, and others, explains the fast-paced growth of the new age business, rapidly reducing demand for neighbourhood grocery shops, especially for young buyers. Ignoring these economic realities shaped by wide-ranging consumer choices is difficult, even though resorting to protectionist measures can help the traditional business model withstand the immediate challenge. For manufacturers of grocery goods, catering to e-commerce and quick commerce stores only requires a structural change in the inventories. To cater to the demand of neighbourhood shops, manufacturers depend on carriers and forwarding agents to reach out to distributors and, through them, to retail shops. Manufacturers stand to gain from the shift, as instead of dealing with a large number of distributors, they only need to negotiate with e-commerce and quick commerce companies and supply the stocks directly to the warehouses of these companies. The elimination of intermediaries increases the profit margins of manufacturers, and this advantage becomes a strong reason for them to prefer an e-commerce company over business through the neighbourhood shop route. The digital commerce initiative, DigiDukaan, is a new solution created by the Open Network for Digital Commerce to help small retailers and local grocery stores join the digital economy and work better. These grocery stores account for 70 to 80 per cent of FMCG sales in the country, so losing this business to e-commerce and quick commerce directly affects the profit margins of both the grocery shops and the distributors. DigiDukaan facilitates the digital onboarding of grocery shops, but their efficiencies will be judged by consumers through comparisons of the service provided by delivery boys and delivery riders of e-commerce and quick commerce companies. The application of artificial intelligence by digital platform companies enables them to create an inventory of wide-ranging products by analysing consumer preferences within a residential area, but a grocery shop is limited by both a lack of such technological access and the owner’s investment capacity. While the adoption of digital technology allows grocery shops to improve their profit margins by directly procuring inventory from manufacturers through online orders and more efficient replenishments, meeting the diverse preferences of all consumer segments will still pose a challenge. Digital access will allow the grocery owners to share inventories with their traditional customer base, but taking cues from quick commerce companies of adopting the business strategy of bundling multiple items to influence consumer buying decisions and buying in bulk to economise door-to-door delivery is essential for steady profit margins. For single-owner-managed grocery shops, simply onboarding to digital platforms will not prevent them from losing customers to quick commerce, as meeting the demand for hyperlocal delivery will necessitate hiring delivery personnel, which incurs additional costs. The profit earned from digital order placement and replenishment will be crucial for such shops and will be a key determinant in investment decisions for owner-managed grocery stores when hiring delivery boys to cater to the doorstep delivery of grocery items. An advantage of neighbourhood grocery stores that quick commerce companies cannot beat is their ability to allow neighbourhood residents to avail themselves of goods on credit without interest. If digital access and delivery efficiency improve, grocery shops can leverage this business strategy, which is more advantageous than the opaque discounts offered by e-commerce and quick commerce companies, to survive the competition. The expansion of late-night delivery by quick commerce companies, which relies on rotating delivery pickers and security staff at stores, will continue to pose a challenge for grocery shops even after they have completed their digital onboarding. The new realities demand the adoption of innovative strategies by neighbourhood grocery shops for long-term sustainability.