Anushruti Singh
It’s apparent that kirana stores in India are undergoing a huge shift and anyone with a basic understanding of retail will ascribe this to two reasons: impact of new retail models on basic grocery stores and consumption surge. This sea-change is clearly visible in the big cities. However, retail shops and basic mom-and-pop grocery stores in the hinterlands are still a little behind. But they are catching on, asserts Sameer Gandotra, Co-Founder and CEO of Frendy, an Ahmedabad-based tech-enabled small format grocery chain for smaller towns and rural India.
This start-up aims to transform the shopping experience in small towns and villages by establishing modern neighbourhood grocery mini-marts and connecting them to micro-kiranas (mom-and-pop stores) through digital platforms. Currently, the company operates 25 marts and 2000 micro kiranas across rural Gujarat and aims to scale its business to 100 marts and 3,000 micro kiranas in the next 12 months.
Frendy’s mantra is to make “daily shopping better”. “Towards this end, consumers that walk into a mart get a wider assortment, better pricing, convenience by means of proximity and delivery options, the ability to touch and feel the products (that they may not get at the local kiranas), and in essence a better shopping experience!” says Gandotra.
Frendy was founded in 2019 by Sameer Gandotra, an MBA from the Wharton School and serial entrepreneur, Harshad Joshi, a graduate from ISB, IRMA, and ex-Walmart & Metro Cash & Carry, Gowrav Vishwakarma, a serial tech entrepreneur and Rakesh Israni.
A vision for rural retail
The shopping experience at grocery stores is always fun for urban consumers. With marts coming into the picture, the experience of shopping under one roof has gotten even better, with more options, better quality and discounts. However, small towns and rural areas have fewer options, and they purchase kirana products at prices that may not even include discount. Frendy Mart was founded to fill this gap, says Gandotra.
“Frendy works with micro kiranas and 85 per cent or over 8 million of India’s kiranas are micro in nature. Frendy helps them with single source supply, reduced cash cycles, credit and the ability to sell a wider assortment from the mart and its central warehouse without investing in inventory,” he adds.
“In our previous affordable housing business, we saw that consumers in small towns were becoming increasingly aspirational. We understood that if aspiration exists for Makaan (housing), it will for Roti and Kapra (groceries) as well. Customers in small towns are looking for a better shopping experience, like what they get in big cities, and that’s what Frendy aims to provide,” he asserts.
The company started its operations by targeting towns in Western and Central Northern Gujarat. For Gandotra, operating in rural towns presented fewer challenges compared to urban areas due to lesser competition and higher consumer trust. “Rural India offers a blue ocean of opportunity, especially in towns with populations ranging from 20,000 to 100,000. Small-format stores in these areas cater to basic needs with around 1,000 SKUs, simplifying operations compared to urban settings with thousands of products,” he notes.
Consumers in rural areas prioritise reasonable quality products over a wider assortment, making it simpler for businesses like Frendy. “They appreciate transparent pricing and self-service, which empowers them. Maintaining trust is crucial in these communities, as word of mouth spreads quickly. Frendy focuses on offering a better experience than kirana stores to build consumer loyalty and avoid losing trust,” he says.
Operational model for Frendy
Frendy operates on a unique ‘Hub & Spoke’ model. Each Frendy Mart acts as a micro-warehouse and distribution hub for approximately 50 micro-stores. “Typically, these micro stores or kiranas are in the rural catchment areas which are in a 5 to 10 km radius of the Frendy Mart. This hub and spoke model which operates on the digital rails of our Frendy Apps allows us to easily provide a seamless experience to our end customers who are digitally connected to us via the last mile micro kirana entrepreneur – the Frendy Partner,” Gandotra explains.
Frendy also operates on the franchise model. A Frendy franchise store set-up costs about 15 lakhs. “Currently, these costs are either fully invested by the franchisee who then operates the mart, or the investment is made by an investor and Frendy operates the mart,” he contends.
Going forward, the start-up plans to explore co-ownership models where the company will invest most of the capital, enabling entrepreneurs with limited capital to start and run a mart. “We prefer to work with franchisees who are willing to put their efforts into making the business successful, as their interests are aligned with the success of the store,” he says.
Frendy’s micro kiranas are in rural catchment areas where they typically hold about 100 SKUs. The company has also developed a 300 SKU-strong private label portfolio and has introduced fast food, beverages, bakery items, and children’s entertainment at its marts, which have shown positive results.
“If a customer wants to buy one of these products, they simply walk across to the micro kirana and buy what they need. If they are looking for a larger purchase, modern store offers and wider assortment products that are typically stocked at the closest Frendy Mart, then they can simply place the order for these products on the app and receive the delivery and pay at the micro kirana. This allows underserved communities to get access to a wider range of products. Additionally, Frendy has a central warehouse with an ever-increasing assortment of products which they can also buy on the app,” Gandotra elaborates.
Competition in the market
Though retail in India has unique segments along with competition, the micro kirana market has a lot of potential for growth. Gandotra feels that Frendy Marts are competing with standalone modern trade stores.
“These stores that are mushrooming in smaller towns lack the technology, standardisation, and sourcing strength to be able to afford the modern store experience to customers. By tying up with Frendy as a franchisee, these modern stores get everything that allows them to offer their consumers an experience that is similar to shopping in a supermarket in a large metro city,” he says.
Talking about the newest trend of quick commerce, Gandotra says that Q-commerce is affecting larger and fancier grocery stores in urban India, rather than the small kirana stores.
“It is impacting the bigger stores in urban India who sell premium products to consumers with higher spending power who wouldn’t mind paying a ‘convenience fee’ for their daily shopping! We believe that there is less of an effect on micro kiranas. Once you move to towns and rural India where its largely sachet products that sell, it becomes impossible for quick commerce to work on account of the small basket size. How do you deliver chips @Rs10 in a market where 90 per cent of snacks are Rs. 10 packs, 90 per cent of the beverages cost Rs. 20 and 65 per cent of the shampoo consumption is in sachets. We believe that quick commerce may make economics work in localities with a high density of affluent consumers but that may be a few pockets of that across even entire metro cities,” he asserts.
Expansion and future plans
Recently, Frendy raised Rs 2 crores in debt from UC Inclusive Credit (UCIC), an NBFC arm of Unitus Capital. This funding will be instrumental in supporting Frendy’s ambitious growth plans, particularly in the tier 3+ towns of Gujarat. Frendy aims to add 4-5 marts every month and reach over 50 marts by the end of the year. The company is also exploring co-ownership models to enable entrepreneurs with limited capital to start and run a mart. Additionally, Frendy is in the process of raising a new funding round to expand to 250 marts across Gujarat.
“Frendy Marts & Micro Stores have sufficient scale for Frendy to establish terms of trade with the large brands – local and national. We are in the process of converting to a modern store code with these brands which give us the prices, discounts, offers and schemes that we can offer to customers on a wide range of products. We are currently focused on setting up more marts and covering larger rural pockets in Gujarat. Our focus going forward will be on store profitability and scaling when the time is right, with each store being profitable individually and collectively, driving increased revenue, gross margins, and net margins. We have several margin expansion initiatives as well that we have started implementing at the mart level including Food and Beverages like a tea stall, Indian snacks, a bakery,” Gandotra says.
In about three years, Frendy has achieved close to ₹ 200 crores in revenue, has served nearly 100,000 households and aims to reach profitability within two years.
Currently, they operate more than 20 Marts and 2000+ micro-stores across North and Central Gujarat. “We are in the process of raising a new round to enable us to build 250 Marts across Gujarat,” Gandotra avers.
