4/24/2020 RIL takes hyperlocal route to battle Amazon, Flipkart

https://www.fortuneindia.com/enterprise/ril-takes-hyperlocal-route-to-battle-amazon-flipkart/104503 1/9

7 min read

By SAYAN CHAKRABORTY,  Apr 23, 2020

Customers shopping at a grocery store

Image: Fortune India Archive

ENTERPRISE

RIL takes hyperlocal route to battle Amazon, FlipkartStrategy to put small businesses at the centre of the universe is very different from how e-commerce

has operated in India.

It’s a match made in heaven when a massive platform invests in an equally largedistribution network to digitise one of the most crucial cogs of an economy’sconsumption wheel. In that context, the Facebook-Reliance Jio juggernaut is unique inwhat it has set out to achieve—digitise unorganised retail.

According to an August 2019 note by CARE Ratings, unorganised retail accounted for88% of the $792-billion retail pie in 2018. Needless to say, Facebook and Jio have puttheir fingers in the right basket.

We use cookies to enhance your experience on our website by showing you relevant ads and content.By continuing your navigation, you accept the placement and use of cookies. To learn more aboutcookies and/ or to opt-out of these services, please see our Cookie Policy.

Read ourPrivacyPolicy

X

4/24/2020 RIL takes hyperlocal route to battle Amazon, Flipkart

https://www.fortuneindia.com/enterprise/ril-takes-hyperlocal-route-to-battle-amazon-flipkart/104503 2/9

Also Read

Also Read

This approach is unlike the path treaded by the two dominant forces in India’s e-commerce landscape, Amazon, and Walmart-owned Flipkart. Both companies haveoverlooked the potential of doing business with the millions of neighbourhood storesstrewn across almost every other nook and corner of the country. Truth be told,Amazon and Flipkart have woken up to their potential of late, but the engagement islargely restricted to utilising this vast network as points of last-mile delivery. Amazon,however, has an omnichannel presence through its stake in the More chain ofsupermarkets and Kishore Biyani’s Future Coupons, for its grocery business. Of course,their payment arms—Amazon Pay and Flipkart’s wholly-owned subsidiary PhonePe—are active in this ecosystem, enabling digital payments at the stores.

Unlike these well-entrenched e-commerce businesses, neighbourhood stores will be atthe centre of Reliance’s online commerce universe. “Our focus will be India’s 60 millionmicro, small and medium businesses, 120 million farmers, 30 million small merchants,and millions of small and medium enterprises in the informal sector, in addition toempowering people seeking various digital services,” the company said on Wednesday.

FACEBOOK AND JIO INK $5.7-BN DEAL

How Mukesh Ambani is rewriting RIL’s future

“Concurrent with the investment, Jio Platforms, Reliance Retail Limited (“RelianceRetail”) and WhatsApp have also entered into a commercial partnership agreement tofurther accelerate Reliance Retail’s New Commerce business on the JioMart platformusing WhatsApp and to support small businesses on WhatsApp,” the statement added.

In effect, the engagement will explore a hyperlocal delivery model, say industryobservers.

Both Reliance and Facebook, thus, stand to gain from each other.

Facebook is a champion of the consumer internet play. India is Facebook’s largestmarket in terms of users. The parent app, according to Statista, had 260 million usersas of January 2020, approximately 80 million more than its home market, the U.S.Instagram, owned by Facebook, had another 80 million, second to the 120 million usersin the U.S. However, WhatsApp, which boasts of 400 million users in India andhappens to be Facebook’s biggest buy—the 9.9% stake buy in Jio comes second—stealsthe thunder with its sheer ubiquity.

Yet, Facebook doesn’t make much money from India. The company earned $41.41 peruser in the U.S. and Canada in the quarter ended December 2019. It earned a paltry

4/24/2020 RIL takes hyperlocal route to battle Amazon, Flipkart

https://www.fortuneindia.com/enterprise/ril-takes-hyperlocal-route-to-battle-amazon-flipkart/104503 3/9

Also Read

$3.57 per user from the Asia-Pacific region, of which India is a part. Launched in Indiain 2018, Facebook’s Marketplace offering, a platform that connects buyers and sellers,hasn’t flown off the shelves either. WhatsApp Pay is stuck in a regulatory maze. Besides,Chinese behemoth ByteDance has been quietly sniping at its heels. According toreports, TikTok, Vigo, and Helo, all Bytedance products, have approximately 300million active users in India.

It was about time for Facebook to step on the gas in India.

Reliance, on its part, has been eyeing e-commerce for quite some time—it soft-launchedJioMart earlier this year—without much headway. Some of the country’s biggest offlineretailers, be it the Future Group, the Tata group, or the Arvind group, have struggled ate-commerce. While Jio’s content services have found resonance with consumers, itspayments business, Jio Money, is yet to take off in a meaningful way, yet.

Small is still beautiful

But that is how Reliance operates.

“The play simply is, now that you have built the infrastructure, you also want to controlor own what they are consuming on that infrastructure, what they are shopping,watching, talking, everything. They already have a working prototype in everything,”says a person familiar with the Reliance way of doing business, declining to beidentified as he is not authorised to speak with the media.

“The way Jio usually operates is that, they don’t mind taking time in the experimentalphase. Until and unless they perfect the operating model, they will keep theexperiments going. The moment they reach the optimised operating model, they willscale it as much they possibly can. People don’t realise that even for Jio, it was in theworks for many years before it was launched. People say it took them three years toreach 380 million users, but the reality is that it took them several more years to buildeverything,” this person added.

Facebook and Reliance complement each other. In Jio, Facebook gets a partner to tidethrough regulatory hurdles, access to the telco’s 388 million users, and a hope tocounter ByteDance’s aggressive manoeuvres in India. Also, the use of WhatsApp forbusiness is slated to make WhatsApp Pay mainstream in India. While it will begin withpayments, the service might as well be extended to offering credit and other value-added services. Similarly, in Facebook, Reliance has not only found a source of a largepool of capital to reduce its debt, but also a technology partner with deep insights andexpertise in building consumer-facing digital products.

4/24/2020 RIL takes hyperlocal route to battle Amazon, Flipkart

https://www.fortuneindia.com/enterprise/ril-takes-hyperlocal-route-to-battle-amazon-flipkart/104503 4/9

“India remains an important and large long-term opportunity for Facebook given the400 million-plus users on WhatsApp. We have written in the past about the multi-billion-dollar UPI and payments opportunity in India and are hopeful that deeperpartnership with RIL [Reliance Industries Ltd] will help Facebook continue to driveuser and merchant adoption. Long-term direct connections between users andmerchants are likely to create incremental monetisation opportunities,” MorganStanley said in a report.

While the plan looks perfect on paper, it is fraught with challenges.

“On the one hand, JioMart could enable inventory and the back-end supply chain forsmall shops, on the other, the WhatsApp platform could enable ordering and payments,providing seamless customer experience,” said a research report by Edelweiss. “We dosee formidable execution challenges as well as opportunities,” it added.

The development comes at an opportune moment. The Covid-19 outbreak is poised toexpedite the adoption of digital services in India. Still, launching and running an onlineshop that caters to both businesses and end-consumers is not devoid of challenges.

The challenge lies in implementing the Reliance-Facebook juggernaut’s coreproposition—digitising small businesses.

Explains Sumit Ghorawat, co-founder at ShopKirana, an Info Edge-backed startup thatsupplies to neighbourhood grocery stores, of Reliance’s strategy to install point of sale(POS) systems at neighbourhood stores, “I believe that POS will not work immediately.With POS, you are trying to change a behaviour. For a POS to work accurately, you notonly need to enter every sale on the system, but also enter every piece of inventory thatenters the store. A kirana store owner is not trained to do that. It isn’t easy to do sobecause every kirana store works with several suppliers. For this to work seamlessly, itis imperative that the stores work with a single supplier,” says Ghorawat. “However, ifyou can create a communication between retail stores and consumers, that works verywell.”

In fact, a number of startups such as Udaan, ShopKirana, Jumbotail, OkCredit, andKhataBook, to name a few, have spotted an opportunity in serving the small businessowners, either as suppliers who also give them credit, or partners who digitise theiroperations. Together, these startups have raised close to a billion dollars over the past18 months, with Udaan accounting for the bulk of the money.

“The supply chain for grocery is such that nobody has it ready at scale, particularly tocater to kiranas. Supplying to your own stores is very different from supplying to

4/24/2020 RIL takes hyperlocal route to battle Amazon, Flipkart

https://www.fortuneindia.com/enterprise/ril-takes-hyperlocal-route-to-battle-amazon-flipkart/104503 5/9

MORE FROM ENTERPRISE

Share the article

Leave a Comment

Your email address will not be published. Required �eld are marked*

millions of kiranas,” says an investor at a large B2B e-commerce company, declining tobe identified.

Similarly, hyperlocal grocery delivery hasn’t worked particularly well in India. Ingrocery, Grofers had started out by sourcing from neighbourhood stores, but soonpivoted to an inventory-led model in line with its larger rival bigbasket. Flipkart hadearlier shuttered its hyperlocal wing, Nearby. Similarly, food delivery startups such asSwiggy and Zomato, which are helical delivery businesses as well, have been bleedingmoney. It isn’t immediately clear whether JioMart will have the small business ownersundertake last-mile delivery or deploy its own fleet (it had bought hyperlocal deliverystartup Grab in March last year).

Besides, customer acquisition in a consumer internet business would entail some cashburn, to begin with.

That said, nobody’s undermining the might of Reliance. Says an investor in the onlinegrocery segment on the condition of anonymity, “People should be worried, why not? Atthe end of the day, it’s Reliance. But it is still too early for us to change our hypothesisthat this isn’t a winner-takes-it-all market.”)

Follow us on Facebook, Twitter & YouTube to never miss an update from FortuneIndia. To buy a copy, visit Amazon.

Facebook Reliance Industries Retail Whatsapp

Mergers & Acquisitions Deal Ecommerce Jio Kirana Store

Superapp

LOGIN & COMMENT