Small Retailers Competing With Online Retail Giants: Here's How Fintechs Are Helping Them

The Indian retail industry has become the fourth-largest market globally and is projected to reach $2 trillion by 2032

In the past 10 years, the Indian retail industry has become the fourth-largest market globally and is projected to reach $2 trillion by 2032. With about 13 million retailers, over a million wholesalers and distributors, and a multi-tiered structure, the Indian retail landscape is a complex tapestry, making it one of the most intricate retail ecosystems in the world. Among the retail players in India, the local mom-and-pop stores continue to embody the Indian way of life, fostering deep trust and familiarity. These stores are vibrant hubs where one can find an array of products ranging from groceries, clothing, footwear, electronics and daily essentials.

A majority of Indians still shop from local stores, accounting for 75-78 per cent share of the Indian consumer goods market. These bustling small stores form the backbone of India's retail landscape, catering to the diverse needs of consumers across the country. 

Even in the face of the pandemic, small stores stood resilient. However, with the rapid growth of online retail in India, the existence of these small retailers is under threat across the country. The traditional methods that once served these local sellers well are no longer enough to keep pace with the services offered by online sellers. It's no wonder that the vast array of products available online, discounted prices, and the convenience of doorstep delivery have lured consumers to shift to online shopping for even essentials.

Fortunately, in the evolving retail landscape, fintech companies are playing a vital role in empowering these small stores to adapt and offer services similar to large retailers. Moreover, with the rise of digital financial solutions, fintech companies are creating digital solutions and products that help retailers improve their payment acceptance, internal operations, customer acquisition and other services.

One of the most significant developments in this regard was the introduction of the Unified Payment Interface (UPI) in 2016, which transformed customer-buying behaviour by increasing cashless transactions. In addition, innovative fintech solutions such as Point of Sale (POS) machines, UPI QR codes, and micro-ATMs, to name a few, have made it easier for small retailers to accept digital payments, allowing them to cater to customers who prefer cashless transactions. 

For instance, POS machines have become increasingly popular as they provide a simple and secure way for customers to pay using their credit or debit cards. QR codes are now all the rage as many small retailers use them to accept payments via various mobile wallets. These solutions are easy to use and require minimal investment, making them accessible to even the smallest of retailers. Moreover, they offer a simple and secure way for customers to make payments, which helps increase sales and boost customer loyalty.

Micro ATMs, on the other hand, have proved to be a boon for small retailers in rural areas with inadequate banking infrastructure. These machines enable small retailers to offer basic banking services such as cash withdrawals and deposits to their customers through paper receipts, further increasing footfalls to their shops.

Another innovation that has transformed the way small retailers and street vendors do business is sound box technology. This smart device with a built-in SIM card reads out payment confirmation messages, assuring that the payment has been successfully received without having to cross-check. This simple audio confirmation helps retailers save time so they can attend to more customers and prevents haggling for change. Furthermore, the sound box can be customised to relay payment confirmations in English and multiple Indian languages, including Hindi, Tamil, Telugu, Bengali, and Punjabi. As a result, sound boxes have become ubiquitous across diverse businesses in Indian cities and towns and have been widely embraced by small retailers. 

Buy Now, Pay Later is another fintech solution gaining popularity in India. This innovative solution enables customers to purchase and pay for products later, often with zero or low interest rates. Instead, customers can pay for their purchases in instalments over a period of time, not only making it easier for customers to make purchases but also helping small retailers increase sales. With the rise of BNPL options, small retailers can offer their customers attractive discounts, offers, and the convenience and flexibility they expect from e-commerce giants.

Consumer durable loans, a significant part of BNPL, have also gained significant popularity in India due to their convenience and affordability. These short-term unsecured loans are specifically designed to purchase everyday items such as washing machines, air conditioners, televisions, microwaves, and furniture. Unlike home loans or vehicle loans, consumer durable loans typically have a lower ticket size. Moreover, in order to make these loans more accessible, many lenders offer a no-cost equated monthly instalment option, allowing borrowers to purchase consumer durables conveniently.

Despite the disruptions caused by the Covid-19 pandemic, consumer durable loans have experienced significant growth, with a compound annual growth rate (CAGR) of around 11 per cent over the last three financial years. Interestingly, over 70 per cent of these loans were disbursed to individuals below the age of 40. This trend reflects the increasing preference of the younger generation to finance their purchases through loans. In fact, the retail segment already accounts for 48.9 per cent of the overall lending sector in India, and this figure is projected to grow in the years to come.

All these innovations have one thing in common – they empower small retailers to compete with large players and fare better at attracting and retaining customers, increasing sales, and growing their businesses. As more small retailers embrace these innovations, they will continue to level the playing field and help drive India's economic growth.

The writer is the co-founder and CEO at Paytail. 

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