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JioMart’s Jio moment—can the RIL company disrupt Indian retail?

JioMart is a blend of digital and neigbourhood physical retail that makes it easy for customers to place orders and encourages stores to get empanelled with Reliance Retail.

May 13, 2020 / 12:02 PM IST
Mukesh Ambani (Image: Reuters)

Mukesh Ambani (Image: Reuters)

Queuing up at his local store for grocery worried Naman Jain. With coronavirus cases rising, it was too much of a risk for the resident of the Mumbai suburb of Thane.

A friend then introduced Jain to JioMart, the ecommerce venture of Reliance Industries retail arm. “It’s straightforward. You need to create a login and place an order on JioMart’s WhatsApp number 8850008000 using your phone,” Jain told Moneycontrol.

JioMart sends a link to the customer on WhatsApp that allows the user to pick the items and the order is then shared with the nearest mom-and-pop store. The kirana store alerts the customer when the order is ready. The customer goes to store, pays and picks up the order.

Jain collects his from Dharamsi & Co Kirana, which is 600 meters from his home. No more queues for him.

The disruptor

It was on April 26, four days after Reliance Retail signed a deal with Facebook-owned WhatsApp, that JioMart went live in Thane, Kalyan and Navi Mumbai after five months of a soft launch.

The tie-up was part of the Facebook-Jio Platforms deal that saw the social media giant pick up a 9.9 percent stake in RIL’s digital unit for $5.7 billion.

India’s biggest FDI in technology is also expected to change the face of ecommerce, especially online grocery, an increasingly competitive space. As the coronavirus outbreak changes consumer behaviour, the competition will only get fierce.

“Jio Mart, Jio’s digital new commerce platform, and WhatsApp will empower nearly three crore small Indian kirana shops to digitally transact with every customer in their neighbourhood and small kiranas can grow using digital technology,” RIL Chairman Mukesh Ambani said in a video statement on the day the deal was announced.

Jain is a happy customer but what about the store owner, the second important link in JioMart’s grocery push.

“Due to JioMart, we are getting more customers and products are also getting sold. Otherwise, most customers preferred to go to supermarkets,” Dharamsi store owner Manishbhai Dedhia said.

Supermarkets and malls continue to be no-go in most parts of the country as Indians stay home to break the chain of coronavirus infections.

“Margins of kirana stores are in the range of 10-15 percent, of which around 5-6 percent would be shared with JioMart,” Dedhia said.

Owners like Dedhia can keep a tab on their inventory through the Point of Sale (PoS) machines installed by JioMart. These machines also allow them to order their supplies from Reliance’s cash-and-carry stores.

 ALSO READ: Here's why Facebook bought stake in Reliance Jio for Rs 43,574 crore

Kirana to the rescue

After the lockdown was announced on March 24, customers struggled to get groceries and other essentials from established e-retailers like Big Basket, D-Mart Ready, Big Bazaar and Amazon.

The sudden spike in orders led to delays and even cancellations as restrictions on the movement of people and goods hobbled these companies.

Kirana shops came to the rescue of harried customers. JioMart connected them to their smaller but efficient neighbourhood grocery stores.

The company took a risk by rolling out during the lockdown but it seems to have worked. It has not only allowed the company to on-board customers but has also given it a chance to test waters before expanding to other cities.

The big picture 

“Data is the new oil,” Ambani had said at the launch on Reliance Jio in 2016.

Reliance Jio has maintained it wants to more than a telecom player and is on track to be as an end-to-end digital behemoth.

In its three and half years of existence, Jio Infocomm has emerged as India’s biggest telecom service provider with 388 million subscribers.

Its pricing strategy has played a big role in Jio bagging 32 percent market share in terms of subscriber base, way ahead of rivals Bharti Airtel and Vodafone-Idea.

The telecom business ties in neatly with the company’s digital ambitions.

In the last few weeks, Jio Platforms, of which telecom business is an important part, announced investments worth $8 billion.

After Facebook picked a 9.99 percent stake, American private equity giant Silver Lake Partners bought 1 percent of Jio Platforms for $750 million. Vista Equity Partners also picked up a 2.3 percent stake for $1.5 billion.

The Reliance Retail and WhatsApp arrangement will go a long way in making JioMart “Desh Ki Nayi Dukaan", as the company describes itself.

India is the biggest market for WhatsApp with 400 million users, while RIL is the biggest retail player in the country.

The partnership will allow consumers to order through Facebook or WhatsApp and these will be fulfilled by Jio’s network of small kiranas and wholesale businesses.

“Our focus will be India’s 60 million micro, small and medium businesses, 120 million farmers, 30 million small merchants and millions of small and medium enterprises in the informal sector,” Jio has said.

India is predominantly a cash economy. The retail sector is largely unorganised and traditionally skewed in favour of offline though online sales have gained in recent years.

The social distancing norms will lead to a noticeable shift towards ecommerce, with customers preferring the safety of homes over going to shops.

Despite digitisation push, cashless transactions remain minuscule. But the outbreak may change that as merchants and customers will look to technology to minimise contact to guard against infections.

For now, customers have to pay in cash for their grocery but experts are of the view that the tie-up with RIL will help Facebook hasten the launch of WhatsApp Pay, which is in a testing stage.

The game-changer?

RIL’s ambitions for Jio are bigger and deeper, says Greyhound Research, a technology and innovation advisory firm.

Biggest investments, in terms of people, technology and maybe even acquisitions in the coming times would be observed in commerce, Greyhound Research Founder & CEO Sanchit Vir Gogia said.

“RIL will put to use its recent acquisitions and offer omnichannel retail across key categories like grocery, pharma, electronics, fashion and lifestyle. With the enabling tech available in-house, RIL can even consider using new-age retail formats like mobile vans,” he said.

The data giant’s collaboration with one of the most common communication platform could boost many businesses, said Zulfiquar Memon, Managing Partner, MZM Legal, who has worked closely with the retail industry.

“The Jio-WhatsApp partnership is a game-changer,” he said. “This JV is not restricted to benefit the kiranas and small retail stores but could change the way the entire B2C (business to consumer) industry operates, including making payments platforms easier and safer.”

Security and consumer data protection would be crucial for an uninterrupted run, he added.

ALSO READ: Jio-Facebook could usher in Uberisation of India's hyper-local micro shopping

 Online food and grocery retail, which accounts for just 0.2 percent of the total market share, is expected grow to 1.2 percent and will be worth $10.5 billion by 2023, driven by an increased assortment of products and efforts like express delivery operations, a report by consulting firm Redseer has said.
Kirana stores know their customers well and as a result have a solid customer base but are unorganised and inefficient. The entire experience of over-the-counter shopping was not attractive to a lot of people because it was time-consuming, said Abhishek Saxena, Founding Partner, Phoenix Legal.

The JioMart–WhatsApp collaboration would tap into the solid customer base of kirana stores and tide over inefficiencies associated with such shops, Saxena said.

It will digitise kirana stores as they will receive orders and eventually payments on WhatsApp.

Its widespread network was another opportunity for Reliance Retail to reduce operation cost as grocery space gets competitive, with startups, too joining in.

Its aggressive expansion saw Reliance Retail's revenues go up by 24.8% year-on-year to Rs 1.63 lakh crore for the financial year 2020.

Analysts foresee a consolidation in the grocery space, allowing for only two to three big players.

Walmart-owned Flipkart is mulling a full-fledged wholesale business.

Facing a staff crunch, several online players have tied up with Swiggy and Zomato for doorstep delivery.

They believe JioMart will ensure that the demand-supply gap is plugged.

The Indian consumer is price-sensitive and usually explores the best options before making a purchase. JioMart, with its various offers and WhatsApp as a partner, can target such buyers.

Desh Ki Nayi Dukaan is now open for business.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.

Himadri Buch
Himadri Buch
first published: May 13, 2020 12:02 pm