Race in the Indian online grocery market is hotting up and Reliance is the only Indian company that possesses the resources to take Amazon head-on at its e-commerce game.
Mukesh Ambani’s Reliance is already in the crosshairs for Amazon CEO Jeff Bezos. Especially when Reliance JIO telecom services has penetrated untouched corners of the country, inadvertently making for itself a much bigger customer base than the world’s biggest e-commerce platform.
Amazon announcement of investing $1 billion in the Indian market has raised many questions. Among them is- Is Bezos targeting Reliance JIO? If yes, then why?
Increasing demand, especially among the youth, has made Amazon a behemoth in the e-commerce industry. The expanding market culminated into a number of inspired Indian firms – Flipkart, E-bay, Snapdeal, Myntra and Paytm – vying to take a chunk of the sizable market. But none has been able to keep up with Amazon’s exponential growth (apart from Flipkart, now owned by Walmart).
But That Was Until India’s Richest Man Entered The Market
Reliance joined the gold rush by announcing a soft launch venture named JioMart. But far more interesting is the fact that Reliance is the only Indian company that possesses the resources to take Amazon head-on at its game. RIL’s ability to enter sectors and dethrone established players is not a new thing. The most recent is the way it reshaped the telecom sector with cheap mobile calls and data, thereby, sending behemoths like Vodafone and Airtel into frenzy.
Amazon Owner Jeff Bezos net worth is estimated to be around US $117 billion while Reliance Owner Mukesh Ambani’s net worth is US $60 billion.
JioMart, under Reliance Retail, is an online grocery business that connects local offline stores and bring them to a digital platform. It will also link producers, traders, different brands and consumers. Mukesh Ambani quickly played the nationalist card, calling his venture “Desh Ki Nayi Dukaan” (country’s new store).
Biggest Threat to Amazon’s Hegemony So Far, Even Bigger Than Walmart
But JioMart is still in its pilot stage and only functional in 3 cities of India. Then why is it the biggest threat to Amazon? It all points to the Jio telecom user base, which Reliance effectively used to enter the telecom industry. Jio nailed the telecom industry upside down with its revolutionary scheme. Today, it is one of the largest user bases in India, i.e. more than 360 million subscribers.
Furthermore, Reliance’s JioMart, unlike the others in the pack, is innovating its own strategy rather than a copycat model. In fact, in the O2O model, consumer searches and narrows down products online, but buys from a physical store. This takes away the warehousing overhead and helps save costs and bring merchants together to cater to local demands.
Under this JioMart project, Reliance has projected to connect 20 crore households to 3 crore offline retailers. It is building a new ecosystem instead of just tapping into Amazon’s kitty. However, Amazon too has entered the grocery market with its Amazon Prime, which promises 2-hour delivery. Here JioMart and Amazon directly lock horns.
Acquisition And Govt. Guidelines – What’s Benefiting JioMart?
To take on Amazon, Reliance has also joined hands with many software companies like C-Square to solve issues related to distributors, online e-commerce, retailers and sales force automation. Similarly, in March 2019, it acquired logistics service platform called Grab A Grub to boost its e-commerce initiative.
Moreover, in 2019, the Indian Government brought new laws that restricted foreign e-commerce industries from selling goods from their own websites and Apps, especially with overwhelming discounts. It has helped Indian companies enter e-commerce platforms.
Reliance Retail also has its fashion outlets called Reliance Trends. It also serves online, but the customers are less in comparison to Amazon and Flipkart. JioMart, perhaps in the future, will also boost Reliance Trends’ online customers. Nevertheless, it can challenge Amazon dominance in apparel, clothing and all fashion accessories.
Amazon’s Foray In The Grocery Market – Turning Tables On Reliance JioMart
Amazon Prime’s 2-hour delivery doesn’t have the cost-saving model that comes with Reliance’s O2O model. The day Reliance started signing local merchants; Amazon too came up with its new strategy in an attempt to tackle the challenge posed by Reliance JioMart.
That is, in 2019, Amazon signed a deal with Future Group and bought a 49% stake. It is interesting to know that Future owns 7.3% stake in Future Retails. Future Retails currently operates more than 1,500 stores in India, including Big Bazaar. Subsequently, Amazon can now acquire shops that come under Future Retails, including 7.3% of BigBazaar.
Then in September 2018, Amazon and Samara Capital joined hands to acquire Aditya Birla Group’s grocery and food retail chain called ‘More’. Samara Capital and Amazon hold 51% and 49% stakes respectively. In 2018, ‘More’ with 575 stores stood as the 4th largest retail chain in India.
Furthermore, Amazon has also opened its only offline grocery store in Bengaluru, named, Amazon Fresh. It basically delivers fresh fruits, vegetables, meat, dairy, and other packaged foods. Now, Amazon Fresh also plans to cover other metropolitan cities as it bids to counter Reliance’s JioMart in the online grocery market.
All Eyes On The Indian Online Grocery Market
Indian online grocery market is a toddler, estimated to be around $879 million a year which is being used by only 0.15% population. However, as per analysts annual sale of this sector could go up to around $14.5 billion by 2023.
According to AT Kearney consultancy, Indian e-commerce is a market of US $60 billion, of which, online grocery delivery is one of the fastest-growing markets. It accounts for an annual sales growth of 87%. Surprisingly, Amazon’s money-grubbing nature will never allow them to lose a huge market like the India online grocery space, but then, Reliance’s entry has signalled a paradigm shift.