kirana store business plan: costs, margins, and profits in India

Kirana stores are departmental stores in Indian localities which serve as a center for groceries and other items of daily use for the local community. Opening a Kirana outlet is a simple process which does not require any special skills or degree. With decent funding, anyone can start operating their Kirana store selling their choice of items.

Moreover, as Kirana stores sell general daily items for almost every household use, the revenue generation is almost a sure shot process, albeit the local competition around.

What is a Kirana store?

A Kirana store is a departmental shop which serves as the local neighborhood stores in India. One can find daily items of household use like rice, wheat, vegetables, spices, shampoos, etc. The store size depends on the investment made, it can be a small shop serving daily rations or a mini-mart kind of set-up allowing customers to pick their own items.

Why open a Kirana store?

Kirana stores are worthy investments if you are looking for a regular, moderate inflow of income. Even during the pandemic, Kirana stores sales surpassed many e-commerce giants and supermarkets.

Here are some other benefits of operating a Kirana store:

1. Ease of accessibility by daily customers
2. Strong interpersonal relations with customers
3. Low stocking requirements and risk
4. Credit and discount advantages
5. Flexible payment options
6. Home delivery without any minimum delivery limit for a localized area

These are a few things which can make your Kirana store a profitable venture.

How to Start a Kirana Store?

Here is a step-by-step guide to open a successful Kirana store in India:

1. A sound business plan

No businesses can operate successfully for much longer without a sound business plan. One must understand the target range of their customers and the average income of the locality they are serving in to price their products accordingly.

You may also need to figure out how much manpower you may need for your start-up for delivery, packing items, etc.

2. Selecting locality

Selecting the right locality is also an essential step towards opening your Kirana store. One should go for an ideal location which can be easily accessed by the public with reasonable security. You should also look for an area with less competition for your business and good visibility.

3. Required Investment

When you are thinking of investment, be prepared to include costs to be expended on commodities, manpower, suppliers, maintenance, etc.

The required investment also depends on whether you want to open a small-scale shop or buy a franchise.

Read More – Shop Loan

4. Registration and licenses

When you have ascertained the volume and scale of your business, you can then proceed with fulfilling the legal formalities necessary.

A Kirana store needs the following registrations:

i) Shops & Establishments Registration :This is a state-specific licence that regulates essential aspects like working hours, employment terms, and store conditions. You must apply for it with your local municipal authority or labour department. The process usually involves providing basic business details such as the store name, location, and the number of employees.

ii) Trade License: This licence allows you to legally operate your business in a specific location. It is issued by your local municipal body. This application requires details about your business premises and proof of compliance with local health and safety standards. 

iii) Food Licence: If your local store sells food items, you must get a food or FSSAI licence. This guarantees that the food you sell meets safety and quality standards. Depending on the scale of your store, you will need to apply for one of the three types of FSSAI licence- basic, state, or central. The application can be submitted online through the FSSAi website with information on the food items you would be selling.

iv) Entity Registration :Registering your Kirana store as a legal business entity is essential for smoothly operating and protecting your business from potential legal issues. As per the size and nature of your store, you can register as a sole proprietorship, partnership, Limited Liability Partnership (LLP), or a Private Limited Company (Pvt Ltd). Each structure has its own legal implications and tax benefits. Entity registration can be done online through the Ministry of Corporate Affairs (MCA) portal or with the help of a professional, depending on your chosen business type.

v) Fire Safety Certificate: For safety reasons, your store needs to meet fire safety regulations. To get this certificate, your store will be inspected by the fire department. They will check for extinguishing systems, emergency exits, and overall fire preparedness. Once all safety standards are met, you will receive your certificate. 

vi) GST (Optional): If your store sells goods or services, you will need to register for Goods and Services Tax (GST). This is mandatory under India’s tax regulations and ensures the legal operations of your business. GST registration can be done online through the official GST portal. You will need to provide details like your PAN number, bank account, and business name to obtain a GST Identification Number (GSTIN).

If your turnover exceeds Rs. 20 lakhs annually, your Kirana business will have to register under GST to obtain the GSTIN or the 15-digit unique identification code.

5. Inventory

To manage an inventory, start by selecting what items and brands you want to sell. You can review the best selling products by visiting your nearby departmental store. For procurement, you could either use a distributor or get it directly from the wholesaler, which may be a little bit expensive.

You can also use online business accounting software to keep track of your inventories. This will help you to integrate digital receipts and payments more easily than doing so manually.

6. Selecting the right vendor

Effective financial management is crucial to ensure the smooth running of your Kirana store. Start by creating a detailed budget to track daily expenses such as inventory costs, employee wages, and operational overheads. Implementing a system to monitor cash flow will help you avoid financial shortages and manage working capital efficiently. 

For long-term growth, consider reinvesting a portion of your profits into expanding product lines or upgrading store infrastructure. Financial planning tools or software can also be used to simplify bookkeeping and keep your finances organised. 

7. Selecting the right vendor

Select the right vendor based on certain evaluations once you have selected which products to sell. For your perfect vendor, you need someone with reliability on quality products and on-time deliveries.

Look to keep your inventory cover between 2-4 weeks. You can also go for seasonal items, other than the in-demand ones to cater to the niche segment of customers.

Dairy and FMCG products like soaps, detergents, and cosmetics offer lucrative margins, though you need to be careful and follow the first in first out rule with dairy products.

8. Study your competitors

Visit the nearby local departmental stores and even supermarkets to get a hang of the operations and way things are managed. Make a note of the shop structure and which brands are mostly stocked. Look for new ideas and opportunities that can set your Kirana store apart.

Along with this, take time to engage with your customers directly. Ask them about their preferences and shopping habits. Understanding their needs and desires will enable you to tailor your product selection and enhance their overall shopping experience. Regularly gather feedback to identify gaps in the market and adapt your offerings accordingly. This approach can help build customer loyalty and position your Kirana store as a trusted source for the community. 

9. Add-on services

People like to be treated specially, particularly if they want to buy items from a specific store regularly. From home delivery services to an attractively designed shop, you can explore what things you can do which may set you apart from your competitors nearby.

Find out what other Kirana stores nearby are doing, identify an opportunity and grab it with both hands.

10. Offers & Discounts

You can cook up some attractive schemes, offers and discount policies to retain buyers. The main aim here is to keep your buyers engaged with regular service from your Kirana shop.

As a start-up, it is prudent to advertise your business using all resources at hand to spread the word of a new convenience store in the locality. Mobile marketing is an economical way to engage with your customers and spread word about your business.

You can also take a step ahead with discount vouchers and freebies for children.

How Much Money is Required to Open a Kirana Store?

Opening a Kirana store in India typically requires an investment of ₹5 lakh to ₹15 lakh. The final amount for departmental store opening costs depends on various factors, including location, store size, and step-up requirements.

Store Rent and Deposit

The cost of renting a space will depend on the location of your Kirana store. For example, stores in urban areas or high-traffic zones tend to have higher rent compared to those in smaller towns or rural areas. 

• In a Tier-1 city, rent can range between ₹15,000 to ₹50,000 per month. While in smaller towns, rent might be around ₹5,000 to ₹15,000.
• Most rental agreements also require a security deposit, typically equivalent to 3 to 6 months’ rent. This could add up to ₹45,000 to ₹3,00,000 in upfront costs, depending on your location. 

Interior Setup and Fixtures

Setting up your store involves expenses related to shelves, racks, counters, lighting, display units, and basic furniture. Additionally, you may need a counter for billing, a refrigerator for perishables, and storage units for bulk goods. 

• Depending on the size and layout, you could spend anywhere between ₹30,000 to ₹1,50,000 on interiors and fixtures. 
• If you need specialised equipment like freezers, input an additional ₹25,000 to ₹50,000 for basic models. 

Initial Inventory Purchase

Your opening inventory is a significant part of your initial grocery shop investment. You will need to stock a variety of products. It includes essentials such as grains, flour, sugar, packaged goods, toiletries, and other household items. 

• The cost of stocking your store will depend on the variety and quantity of products. For a small store, you may have an initial investment of ₹1,00,000 to ₹3,00,000 to stock up on products. A larger store could require upwards of ₹5,00,000 to ₹10,00,000.

Licensing and Legal Compliance

Obtaining the necessary licences for your Kirana store, such as a Shop Establishment License, GST registration, Trade License, FSSAI License (if you sell food), and Fire Safety Certificate, involves costs:

• While many of these licences can be acquired online, the cost for registration and approvals may vary.
• On average, you can expect to spend ₹5,000 to ₹15,000 on acquiring these licences. It depends on the state and specific requirements. 

Technology and Billing Setup

Today, even Kirana stores are adopting digital payment methods and point-of-sale (POS) systems. To maintain a smooth billing process and cater to customers who prefer cashless payments, you will need basic technology like a computer or billing machine, printer, barcode scanner, and payment gateways.

• A basic billing setup can cost anywhere from ₹10,000 to ₹30,000, depending on the equipment and software you choose. 

Marketing and Advertising

To attract customers to your new Kirana store, especially in the initial months, you will need to invest in marketing efforts. This could include distributing pamphlets, putting up banners, creating a store signboard, and even offering promotional discounts. 

• Basic local marketing efforts could cost around ₹10,000 to ₹50,000 depending on your approach. 

Staff Salaries

If you plan to hire employees, their salaries will form part of your monthly expenses. Depending on your store’s size, you may need 1-2 staff members to assist you with billing, stocking, and customer service. 

• The average salary for staff in a Kirana store can range from ₹8,000 to ₹15,000 per month. 
• For two employees, you would need to budget ₹16,000 to ₹30,000 monthly for salaries, plus any statutory benefits like PF (Provident Fund) and ESI ( employee State Insurance) if applicable. 

Working Capital

In addition to fixed costs, you will need some working capital to cover day-to-day operational expenses. It can include electricity, water, transportation, and replenishing stock. 

• Depending on the size of your business, you might require ₹50,000 to ₹2,00,000 in working capital to ensure smooth operations for the first few months. Non-banking financial institutions like Lendingkart provide working capital in this range in order to assist small businesses in reaching their goals of opening a Kirana store successfully.

Miscellaneous Costs

There are always unforeseen costs when starting a business. These might include small repairs, maintenance, transportation of goods, or additional setup requirements. 

• Setting aside ₹20,000 to ₹50,000 for miscellaneous expenses is advisable to avoid cash flow issues during the early days of your Kirana store. 

Overall Initial Investment

Based on the above cost range estimates, the initial investment required to open a Kirana store can range between ₹2,50,000 to ₹15,00,000. This depends on factors like the size of the store, location, and the variety of products you plan to offer. For a small neighbourhood Kirana store, expect to spend on the lower end of this range. On the other hand, a larger store in a prime location with more inventory will push the investment towards the higher end. 

How Does a Business Loan Help to Open Kirana Shops?

Financing is a crucial step when starting a grocery store. Setting up even a small kirana store can require a significant amount of capital. Business loans can provide the financial support you need to cover various startup expenses. Here’s how a business loan can help you:

• Adequate Loan Amount: With a business loan, you can secure ₹50,000 to ₹2 crore from Lendingkart to meet the financial needs of your Kirana store. This amount can cover the costs of setting up your shop, stocking inventory, marketing, and other essentials. 

• Affordable Interest Rate: Many lenders offer competitive interest rates, making it easier to manage repayment. Lendingkart provides interest starting from 1-2% per month. Affordable interest rates mean that your monthly EMI would not put too much pressure on your budget. It would allow you to focus on growing your business. 

• Flexible Repayment Options: Business loans often come with repayment terms that can go up to 60 months. It provides flexibility in how you manage your loan. This allows you to spread out payments over time, reducing the monthly financial burden. 

• No Collateral Required: Most business loans do not require you to provide collateral, guarantors, or any security. This is particularly useful if you are a new entrepreneur who may not have valuable assets to pledge. 

• No Restrictions on Usage: Business loans often have no restrictions on how you use the funds. This gives you the flexibility to allocate money to different aspects of your Kirana store- whether it is buying inventory, paying rent, or investing in marketing. 

• Simple Application Process: With straightforward eligibility criteria and minimal documentation, accessing a business loan from Lendingkart is hassle-free. This ensures you can focus on setting up your Kirana store without getting bogged down in paperwork. 

Important Factors Influencing Kirana Store Business 

The enduring success of the neighbourhood Kirana store in India is rooted in several key factors that keep it thriving. This is despite the competition from large retail chains and e-commerce platforms. 

• Ease of Access: These local Kirana stores are conveniently located in residential areas. It makes them highly accessible to local customers. 

• Availability of Local Produce: From pickles to batter and read-mix powders, kirana stores often stock popular items that are harder to find in supermarkets.  

• Locally Relevant Assortment: Kirana store owners are well-attuned to the preferences of their local community. They provide Kirana store items that cater to local tastes and demands. This personal touch makes them a reliable option for many consumers. 

• Quick Delivery and Flexibility: Many Kirana stores offer same-day delivery, often within an hour. It allows trusted customers to buy on credit. This adaptability strengthens their bond with the community and ensures loyalty. 

How to Increase Sales in My Kirana Store?

Increasing sales is not something one can achieve overnight. You have to act all along and gradually increase sales and drive revenue with the following tips:

• Retain customers: Building customer loyalty is essential for long-term profitability. Offer personalised services like home delivery or credit options. It ensures you maintain a friendly relationship with regular customers. Consistent customer engagement through loyalty programs or discounts can also encourage repeat business.

• Keep unique products: Stocking unique or hard-to-find items helps differentiate your store from competitors. Dairy items such as milk and yoghurt offer margins of up to 20%, This can attract customers looking for speciality products and increase footfall. Offering locally sourced goods or niche products adds value and enhances customer interest. 

• Focus on customer relationship: Developing a strong relationship with your customers fosters trust and repeat business. Engaging in small talk, understanding their preferences, and providing personalised recommendations can go a long way in making them feel valued. Building rapport ensures that your customers feel valued which leads to positive word-of-mouth and increased customer retention. 

• Take your store online: Expanding your Kirana store to online platforms opens up a broader customer base. Offering online ordering, and delivery services, and promoting your store on social media can boost sales and increase brand visibility. Plus, you can partner with delivery apps or create your app to streamline the shopping experience for your customers. 

• Identify buyer trends: Staying aware of shifting customer preferences and popular products can help you stock accordingly. Keeping up with seasonal demands or popular trends enables you to cater to customer needs more effectively, which can lead to higher sales. Using customer feedback and analysing buying patterns allows you to make data-driven decisions about inventory. 

• Promote business with offers: Offering discounts or bundle deals is an excellent way to attract more customers. Promotions like “Buy 1 Get 1 Free” or festive discounts can encourage bulk buying and create excitement around your store. Offering special discounts to loyal customers during off-peak seasons can also help sustain steady sales throughout the year.

• Improve customer service: Providing excellent customer service is key to standing out. Simple gestures like quick checkouts, friendly interactions, or helping customers find items can improve their shopping experience and boost customer satisfaction. Additionally, training your staff to be responsive and attentive can create a warm shopping environment that encourages repeat visits. 

• Advertising: Promote your Kirana store through local advertising, flyers, and word-of-mouth. Advertising on social media platforms or partnering with local influencers can increase your store’s visibility and help draw in more customers. Running seasonal campaigns or highlighting new products can also keep your store top-of-mind for shoppers in your community.

• Do Cross-Promotions: Collaborate with nearby businesses, such as a local bakery, and offer joint discounts. For example, when a customer spends a certain amount at your store, they can get a discount on bakery items. This mutually beneficial partnership can attract more foot traffic and increase sales for both businesses.

• Eye-Level Placement: Place essential and popular items at eye level on shelves to make it easy for customers to find what they need quickly. It encourages faster and more frequent purchases. By positioning high-demand products in this way, you can also drive attention to higher-margin items. It subtly increases the store’s profitability. 

• Checkout Counter Displays: Keep small, high-margin items like candies, snacks or personal care products near the checkout counter to entice last-minute purchases. This strategic placement leverages impulse buying behaviour. It helps boost overall revenue with minimal extra effort or inventory adjustments. 

• Fresh and Local: If your store offers fresh produce or locally sourced goods, make sure these items are prominently displayed. Even in small spaces, fresh and local products can draw customers in. These often lead to additional purchases of other items.