Why Should Retail Businesses Consider the Store-Credit System?

How can the retail businesses generate revenues and secure a loyal customer base using the store-credit system?

Traditional Indian shopkeepers or what we colloquially call Kirana stores form the bedrock of the retail industry growth in India. The traditional retail stores in India play a pivotal role in India’s growth since it alone contributes 11 percent in GDP and employs 8 percent of its total workforce which is roughly 43 million as per a joint report from Trust for Retailers and Retail Associates of India and Accenture. Despite delays and irregularities in supply chain and logistics in the lockdown due to mobility restrictions, the pandemic has witnessed optimum efficiency displayed by the local neighbourhood retail stores with better stocking of essentials and serving India’s massive 1.3 billion population.

Limited business hours and online shopping of essentials – Worrisome?

The pandemic has caused a paradigm shift in consumer buying behaviour and choices. It has transformed the quintessential ‘discount seeking Indian customer into a ‘convenience seeking’ one. Therefore, in the future customers will shift to online channels for buying household essentials. The joint report from Trust for Retailers and Retail Associates of India and Accenture reveals that by 2021 the 13 million family of traditional retail businesses will shrink from its lion’s share of 88 percent to 75 percent. As consumers will increasingly buy online or shop at supermarkets or larger, modern retail stores the local retail stores might lose their hold on the consumer base. As the adoption of digital payments, instant delivery is yet nascent, they might lose ground to other retail formats.

There are many instances where generations of the family have been buying from the same retail store for years. Here, the customer-retailer relation is built on the foundations of trust, which is an advantage for the local retail businesses. The imposition of lockdowns is giving limited shop opening hours for the retail businesses impacting demand and sales. Therefore, local neighbourhood retail businesses need to adopt modern retail practices to reverse the declining trend in sales and profitability.  


The traditional retail stores in India alone contributes 11 percent in GDP and employs 8 percent of its total workforce

What is the Store-Credit system? 

The store-credit system is a value that retail businesses can offer to its customer towards any purchase they make from the store. After an order is paid and invoiced, all of it or a portion of the amount is given as credit points to the customers. Customers in the future can use this store credit point to pay for purchases, and store owners can use the store credit for cash refunds. This credit is owned by one particular customer and is non-transferable to other stores or brands. It is different from offering a discount that does not expire the way temporary sales or promotions do.

Types of Store-Credit Systems 

Retail businesses can implement four types of store-credit systems in their business: 

  • Returns and exchanges: When customers return or exchange merchandise, store credit is often offered in addition to or in exchange for a full refund.
  • Store credit cards: When a retailer extends credit and allows customers to pay later, they are issuing a store credit.
  • Gift cards: When a customer purchases a gift card, they are essentially purchasing store credit to give to someone else. Gift cards also often are used to hold store credit from returns or loyalty rewards.
  • Loyalty rewards: One of the most common rewards customers earn through loyalty programmes is store credit for a future purchase.

Benefits of having store-credit systems 

  • Retain customers and boost loyalty: The store credit system offers customers an additional incentive which becomes the reason to come back to your shop. It gives repeat business and an opportunity to serve your customers well, thus cementing the loyalty of customers. 
  • Encourage to shop more: The store credit system will induce motivation in customers to shop more. When stores offer a credit system with a reasonable return policy, buyers feel motivated to spend more money to fulfill demands. By using store credit for flexible returns, we make customers feel comfortable to shop with your business. 
  • Tide over low sales: This is applicable for small-medium online businesses. Plenty of Returns and exchanges can be an unpleasant experience for e-retailers, but a large number of returns means losing revenue offering store credit can help turn the returns into exchanges. It enables them to expand the return policy for a longer period or accept returns without a receipt, this ensures that money stays in the business while offering a flexible and satisfying shopping experience to the customers.

 What is in it for the retailers? 

Store-credit systems will help retailers to build a loyal customer base, generate revenues and give opportunities for repeat businesses that are desperately required for the retail businesses to stay afloat in such testing times.

Shalmoli Sarkar
Shalmoli Sarkar
An MBA in marketing and a BTech in chemical engineering, Shalmoli writes on marketing strategies and business technology for new and aspiring entrepreneurs.



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