The Changing World of a Shopkeeper

All of you have followed the developments around eCommerce, local commerce, daily-deals etc. as businesses. All these businesses to some or the other degree depend on the traditional shopkeeper as the supply source. eTail is probably the model that depends on him least, because it can go directly to the source, the manufacturer or the large distributor, but it still needs shopkeepers in some categories where the aggregation of demand, like in auto-accessories, happens at the shop-level. Or when one needs services like installation that the shopkeeper can provide. For local commerce, the shopkeeper is the backbone, as it is for many businesses for daily-deals.

Truth be told, most traditional shopkeepers think of themselves as being in the business of moving boxes and managing cash. They haven't really thought of themselves as entities for digitizing supply, taking pictures and writing product descriptions. They also don't think of themselves as being in the business of delivering goods, though most of them do it for some percentage of their orders. Most of them don't have MIS or ERP systems and they manage inventory through heuristics. They don't know how to manage feedback on digital platforms. There are therefore significant challenges in them making the transition to the supplier digital businesses will look for. And it's a lot more.

A traditional shopkeeper may make his money in fairly unstructured ways. He would buy in bulk on credit or against a cash discount for volumes he has back-of-envelope (or back-of-hand) calculations for. He can then weigh goods approximately (erring on the side of less sometimes), pack it in an old newspaper, have it delivered through a person who may be below legal age or statutory salary, do pure cash transactions where he does not provide a receipt or pay taxes, or through credit where he has some leeway on the month-end calculation, and so on and forth. One is not saying adulteration or substituting lower-grade loose commodities is a norm but that too is possible. Each one of these activities adds up to margin. The result is a profitable business that loses value once it gets 'organized'.

And that is where a big problem exists.

Today digital businesses are not only expecting this person to agree to tax scrutiny or accept credit cards, or to install a POS software and MIS, but - what is more important to keep in mind - we're also expecting behavior change, which, as all of us know, isn't easy. A shopkeeper today may be happy getting 5% additional sales through local commerce, but one day he may not deliver his order and not even be apologetic about it because in his earlier world, it was okay to tell the customer he forgot, or his delivery boy came back late from lunch, or that the electricity went off, or the bicycle had a flat tyre.

Online businesses are in the business of structuring this market, of making promises that are kept and of assuring quality and timelines. We must remember the chain is as strong as the weakest link. If we create a middle-layer that will cover-up for what may go wrong, we risk becoming a different business - one that carries inventory of its own, has its own delivery, answers queries on behalf of shopkeepers and resolves problems on behalf of customers and eventually costs more than the efficiency we are seeking to create. So that not being a sustainable option, the other workable solutions involve handholding, education and behavior change.

And that takes a while. When we set up companies that depend on the shopkeeper keeping his promise, this is something we should keep in mind.

[note, this has been previously published in ET-Retail on July 1, 2015]