Corner stores are well placed to benefit from digital commerce

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₹1.5 lakh a month. At some distance, there would be a local agglomeration of shops: such as an apparel store stocked largely with unbranded and regionally made clothing turning over ₹5 lakh a month, a mid-sized metals and plastics store selling wares of ₹3 lakh a month, among other small shops.

There are millions of these traditional retail outlets driving last-mile distribution through India’s triple-fragmented traditional value chains: retailers procure inventory from a regional distributor, which in turn sources it from the manufacturer. At each segment of this chain, a margin is added until the goods reach the end consumer, and this contributes nearly 40% to a product’s eventual price.

Traditional retail formats accounted for 87% of the $1 trillion in consumer spending in 2022, according to McKinsey estimates. Modern trade and e-commerce have grown briskly over the past decade; even so, traditional retail has remained salient and will continue to garner 80% of the $1.5 trillion consumer spending in 2030, across key categories such as packaged grocery, staples, apparel, home and kitchenware, pharmaceuticals, and hotels, restaurants and cafes.

Given the fragmentation that characterizes the traditional retail value chain, there is immense potential for digital capabilities to foster efficiency, driven by aggregation. But this has not happened yet, in large part because the unit economics of it are unfavourable: the average monthly per capita consumption expenditure in urban India is about ₹4,000 and it is half that figure in rural regions.

The average order value, therefore, tends to be small. In addition, 97% of India’s land is in rural regions with limited last-mile distribution infrastructure, which makes logistics