Amazon’s KiranNow: The Indian Online Grocery Market Case

Submitted by - Group 8, Section F

PGP/22/284 - Mohit Agrawal

PGP/22/308 - Harini Katella
PGP/22/311 - Saket Saurabh
PGP/22/330 - Ankita Singh
PGP/22/415 - Muzammil Khan

Questions
1. Analyze the macro-environmental factors affecting Amazon’s KiranaNow using the
PESTEL framework.
2. How have consumer preferences changed with respect to online grocery shopping,
and how can KiranaNow accommodate these new preferences?
3. The common business models which exist in India’s online grocery market are the
following:
a) Marketplace Model- Zero inventory model;
b) Inventory-led Model – The company directly purchases products from the
manufacturer and stores them in fulfilment centres; and
c) Hybrid Model – The company maintains its own inventory of products and acts as
a facilitator between buyers and sellers.

Discuss the pros and cons of each of the above models.

4. What are the pros and cons of KiranaNow’s business model?

5. What are the challenges faced by KiranaNow and what strategies should it use to
overcome these challenges?
6. What are the factors contributing towards KiranaNow’s sustainability and what are
the factors working against it?
7. What options would you recommend to KiranaNow for achieving growth?

Answers:
Q1.

Macroeconomic factors affecting KiranaNow in India

Political – The FDI guidelines for different retail formats were regulated by the Department of
Industrial Policy and Production. 100% FDI in the market-place model is an advantage as KiranaNow
follows this model.

Economical – Indian grocery market is expected to grow to 15% by 2020.

Increase in direct and indirect investments in the economy would result in the increasing consumer
purchasing power.

Online grocery would contribute to about 30-40% of the overall retail business by 2021. Therefore
growth potential for KiranaNow is very high.

Social - Buyer demographics in India show that there is a high increase in no. Of smartphone users
by 2020, and the consumers are slowly adapting to ecommerce platforms.

Indian grocery shoppers were used to negotiating prices to get the best deals, which is not possible
in the online grocery shopping, a behavioural hindrance to Indian grocery shoppers adopting online
grocery shopping also, low rate of technology adoption by Indian homemakers, the largest segment
of grocery shoppers in Indian society, and by small retailers are a challenge to a market place model
like KiranaNow.

Technological – We see that the digital buyer penetration in India is on the rise and would reach
around 70% by 2020, with increase in usage of smartphones and lower data prices.

Poor management of information technology (IT) like the quality of data available being poor,
delivery staff are technophobic, make it difficult for partners to connect with merchants.

Environmental – The strategic deal between Walmart and Flipkart would affect the competitiveness
of KiranaNow.

Legal - According to the FDI guidelines for Indian ecommerce firms, the seller is responsible for the
quality as well as guarantee/warranty of the products and not the ecommerce platforms, this would
in turn reduce liability of KiranaNow

Q2. Consumer preferences have changed over the years, grocery shoppers generally preferred
offline grocery shopping where they could judge the quality of the produce. It was very important
for shoppers to make sure the produce they were buying was fresh and healthy looking.
Furthermore, Indian grocery shoppers were used to negotiating prices to get the best deals. Online
grocery shopping did not allow for such negotiations—a behavioural hindrance to Indian grocery
shoppers adopting online grocery shopping. Another challenge was the low rate of technology
adoption by Indian homemakers, the largest segment of grocery shoppers in Indian society.

The scenario was changing slowly with increasing mobile penetration growing acceptance of online
shopping, growth in the online retail market leading to a reduction in prices, and the launch of
lucrative schemes for customers were all fuelling the growth of online grocery shopping. The
convenience offered by the prospect of grocery delivery to one’s doorstep was another factor that
prompted an increase in online shoppers.

To ensure more consumers came onto its platform, lower the cost of customer acquisition, improve
the purchase volume of repeat purchasers, and generate more referrals by repeat purchasers,
KiranaNow must focus on service elements such as the ease of transaction, fair prices, on-time
delivery, and product quality.
Q3.

A)

Marketplace Model- Zero inventory model

Pros Cons

 Low Cost structure  Quality Control is Difficult

 Since the sourcing of material is done
from local Kirana stores, customers
could approach these stores directly in
case there were any issues.
 Faster Delivery
 Slow Technology Adoption by small
retailers and hence they are left out
 Poor Integration with partners, vendors
and merchants

B)

Inventory-led Model

Pros Cons

 Superior quality control compared to  Cost of inventory storage is high

the zero-inventory model
 Efficient processes leveraging latest
technologies
 Specialized Teams for quality,
packaging, customer service etc.
 Average delivery time would be higher
than that of Market place model.
 Additional maintenance cost for
distribution centre

C)

Hybrid Model

Pros Cons

 Cost will be low compared to inventory
model
 Referral fees from sellers is additional
revenue
 More variety of goods available
 Cost will be high compared to Market
place model
 Integration with partners, vendors and
merchants may be difficult
Q4.

KiranaNow’s marketplace business model

Pros Cons

 Since the sourcing of material was done
from local Kirana stores, customers
could approach these stores directly in
case there were any issues.
 The prices, inclusive of all taxes, for
various products were listed in rupees
and did not usually change on a daily
basis.
 Deliveries were sourced from local
retailers, therefore increasing number
of locations and faster delivery.
 Operating a zero-inventory model, it
has a low-cost structure.
 The company had little control over the
quality of products being supplied by
different retailers.
 Ensuring that the goods delivered were
fresh and undamaged put significant
strain on company resources in terms
of capital and labour.
 Many small retailers were unable to
adapt to the level of technology used
by logistics companies and, hence,
failed to be a part of the value chain.

Q6 :

Operating a zero-inventory model, KiranaNow faced the following challenges.

Merchandising Issues:Collaboration with local retailers led to decrease in quality control. Kirananow cannot
control all the retailers actions. To ensure delivery of fresh products ,especially of perishable category, huge
amount of resources and capital is used.

People-Management Challenges :This industry cannot hold employee for a long time. It seems People do not
find growth opportunities and future prospects. Also , the volatile nature and working conditions make this
industry sceptical to employees, on which this company depends a lot. A lot of training and hiring cost is
wasted, every time a new employee comes on board.

Technology Challenges :Most difficult job is to convince all the stakeholders(employees, customers, delivery
boys) to learn and adapt technology. This is a sole criteria for the success on online grocery business. Also , data
availability for market research and data analytics is poor ,which effects the insight of the company.

Consumer Behaviour :Though digital buying penetration in India is expected to almost double
by 2020, leading to the growth of many small online grocery retailers, relatively few
consumers are ready to buy groceries online.

Logistics : Adapting innovative technology in logistics poses a great challenge in this

Strategies to tackle the problems : Online grocers should give no-questions-asked return
policy upon not meeting the quality criteria, so as to tackle the problem of quality issue. The hiring
process has to be robust so ass to make the process faster and cost effective. Employee job and
working condition should be given more attention to make it employee friendly so as to attract general
public to work here. Thin margins are one of the main reasons for shut-down of most of the
companies in this industry. Lowering operational cost using innovative technology is a effective step
forward. Also, discounts should be reduced gradually so the public does not feel a sudden price shock
and will still continue to buy it. Discounts washes away a great amount of revenue of the company,
which eventually decreases the sustainability of the organizations. Predicting consumer behaviour and
adapting the business according to the observed trends will also help Kirananow to move forward

Q6.

Factors contributing to sustainability of KiranaNow:

1. Business model of KiranaNow was a hybrid model consisting of both inventory-led and
direct pickup. Thus providing flexibility in operations.
2. KiranaNow launched two delivery models- Delivery and Scheduled Delivery to improve
quality of service.
3. KiranaNow also has a very diverse set of vendors/partners. It also had several collection
points which can coverup for one another.
4. KiranaNow partnered with 10-15 super market chains to facilitate delivery.
5. KiranaNow also planned to open 14 collection points in Bengaluru and hire 130 delivery staff
for its implementation.
6. For customer service, KiranaNow had a customer service team that operated from 8:00 a.m.
to 2:00 a.m., seven days a week.
7. Local delivery persons or kirana stores; local Employees deliver the product to the
Customer’s doorstep.
8. Customer preferred time slots were there.

Factors contributing against it:

1. Merchandising Issues

Because of its creative model for last-mile conveyance, working together with neighborhood
retailers caused a large group of item quality issues for KiranaNow. The organization had little
command over the nature of items being provided by various retailers, so institutionalizing item
quality ended up troublesome guaranteeing that the products conveyed were new and flawless
put noteworthy strain on organization assets regarding capital and work.

2. People-Management Challenges
 With KiranaNow teaming up with neighborhood retailers, a huge workforce was required for
conveyance. Procuring and preparing these people to give a superior administration experience
to clients ended up being a gigantic test..

3. Technology Challenges

Adapting to new technology, poor management of information technology (IT) meant that
online retailers like KiranaNow faced problems in collaborating with small retailers.

4. Consumer Behaviour

Foreseeing shopper conduct and adjusting the business as indicated by the watched patterns
was the way to progress. Albeit computerized purchasing entrance in India was relied upon to
twofold by 2020, prompting the development of numerous little online basic supply retailers,
generally couple of customers were prepared to purchase basic supplies on the web. To
guarantee more shoppers went onto its stage, bring down the expense of client securing,
enhance the buy volume of rehash buyers, and create more referrals by rehash buyers,
KiranaNow realized it needed to concentrate on administration components, for example, the
simplicity of exchange, reasonable costs, on-time conveyance, and item quality.

7. What options would you recommend to KiranaNow for achieving growth?

The following options can be used by KiranaNow for achieving growth:

Inorganic growth – Inorganic growth can be achieved by acquiring established-small size retail
grocery companies which will help it in expanding business over different cities.

People management issues - Since the attrition rate is high, 12-30% of delivery staff leave their
respective jobs. For this incentives can be introduced to increase motivation amongst employees
and rewarding system can be brought in.

Technology challenges – To counter this proper management of IT can be done by mentoring and
tutoring small retailers regarding the positive aspects of connecting through technology and how
this can lead to an increase in their sales and profit.

Consumer behaviour – Consumers’ buying experience can be increased by offering better quality
products, in-time delivery of goods, competitive and fair prices of products.

Merchandising issues – Proper quality checks of goods need to be ensured before delivering to
customers can prevent them from taking back of delivered products and thus reducing the costs
incurred by them.