Even with WhatsApp’s 400 million Indian users, JioMart’s success is not guaranteed

Stocking up kirana stores.
Stocking up kirana stores.
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Reliance Industries’ (RIL) entry may have intensified India’s online grocery delivery war, but success is far from guaranteed for the company owned by the country’s richest man. While the company’s plan to marry its digital and retail businesses has some evident advantages, victory over young-but-nimble delivery startups is not a given.

On April 26, Mukesh Ambani-led RIL announced the rollout of JioMart, a grocery delivery service launched in tie-up with Facebook’s instant messenger WhatsApp. For now, the service is available only in Navi Mumbai, Thane, and Kalyan cities of Maharashtra in western India. It will expand to other cities in the coming months.

This move anticipates India’s e-grocery market, pegged at Rs6,201 crore ($875 million) today, growing over 16-fold to hit Rs1.03 lakh crore ($14.6 billion) by 2023. The two young firms that dominate it now—Bengaluru-based BigBasket and Gurugram-based Grofers—are still only scratching the surface despite their several million users each.

On its part, JioMart, a joint venture between RIL’s Reliance Retail and Reliance Jio, is banking on a different business model.

The offering

BigBasket and Grofers are inventory-based e-commerce businesses, which store and deliver branded items. The two also have several of their own brands.

JioMart, however, only acts as a conduit between shoppers and existing mom-and-pop stores, also known as kiranas. Users can place their orders on JioMart’s WhatsApp number, 8850008000. Once the order is ready, the customer will receive an alert with details of the nearest store from where the goods can be picked up. Payment is done only in cash, but online alternatives will be introduced soon.

For starters, this model gives JioMart the ready userbase of India’s 400 million WhatsApp users, experts said.

There are also other advantages that JioMart has over incumbents:

Familiarity breeds business: “The kirana is ubiquitous yet a fragmented entity. Reliance will get to tap into kirana’s wide reach to connect with more consumers and in turn, help them with automation at the backend and scaling up the business,” said Anil V Pillai, director of Pune-based independent marketing firm Terragni Consulting.

JioMart is bringing together online and offline shopping world in a harmonious manner. With kiranas, it gets easy access to more consumers at no extra cost, concurs Shiva Agrawal, research director, innovation at the global market research company Ipsos India.

Asset-light business: JioMart won’t need to invest much as it can lean on Reliance Retail’s 10,415 brick-and-mortar stores in over 6,600 cities with access to cold storage and warehousing facilities, said Ashok K Aggarwal, a Delhi-based independent business and law expert.

Low-cost procurement: JioMart is replicating the business model of China’s largest retailer Alibaba, which buys products in bulk directly from manufacturers to benefit from economies of scale and then sells them to local retailers, experts said. Given its parent company’s deep pockets, this would be an easy feat. “Bulk buying will see JioMart negotiate hard on product prices with FMCG manufacturers, who will be more than willing to extend ‘special prices’ to the company as doing so (selling to one player in bulk) will help the latter reduce their inventory management and warehousing costs,” said Aggarwal.

Private play: Owning brands earns e-grocers better margins. JioMart has big leverage in this space as Reliance Retail boasts of a bunch of such private labels, including Best Farms, Good Life, Masti Lite, and Freshomz. “People have trust in kirana owners owing to personal and frequent interactions. The local seller, too, is familiar with buyers’ choices and in a position to encourage them to try new products. JioMart will benefit from this,” said Rakhi Thakur, associate professor of marketing at Mumbai’s business school Bhavan’s S P Jain Institute of Management and Research.

Together, these could help JioMart take pole-position in the still largely fragmented market.

The hurdles

However, experts also warn of the following pitfalls before this business model:

Getting the product-mix right: Catering to kirana customers is not easy. For instance, buyers in East Delhi would prefer a set of commodities and brands that are different from those of shoppers in South Delhi. Accommodating such diversity could be nightmarish. “If preferred brands are not available, consumers may drop out,” said Pillai of Terragni Consulting. After all, moving to an alternative seller or platform is easy today.

Pricing and revenue sharing conundrum: Given India’s size and diversity of kiranas, the product pricing and revenue sharing model adopted by JioMart would be critical in determining its success. Experts throw a bunch of tricky questions at JioMart: Will, there be standardised pricing across kirana stores? Will there be kirana or customer-specific discounts? Will there be a loyalty programme?

The answers to these will determine JioMart’s success or failure.