After the success of Jio, Mukesh Ambani is trying to recreate the magic with an attempt to disrupt retail through JioMart – but is it really something that retailers should worry about? We break it down.
The Financial game plan
In COVID-19 affected world where the economy faces one of the worst slowdowns in history, Jio still seems to be attracting a line up of global investors with billions of dollars.
At $65 billion, Jio is valued higher than some top technology startups, like Uber, Twitter, and Zoom – and it is still not done with fundraising. So far, it has diluted about 17 per cent of an equity stake for about $10 billion and according to industry information, Jio will let go of further equity and dilute about 20 per cent of its equity going forward.
This will serve in making the company debt-free. Then it will potentially go on to target IPO in an overseas market, eyeing a $100 billion valuation. To reach this target, it will have to bring in an array of services under its umbrella ranging from Payments, digital wallets, logistics, and of course, E-commerce.
Jio Mart is the beginning of this e-commerce ambition for Ambani’s Reliance.
Just days before its official launch in April this year, Facebook invested $5.7 billion in Jio Platforms, picking up a 9.99 per cent stake in the company. Along with it, came a bouquet of ready to reach 400 million Indian Whatsapp users and that is what would have attracted Ambani to Facebook besides a truckload of money. Facebook acquired the messaging platform in 2014 for $19 billion.
Why there’s nothing to worry about
Coming together of two giants like Facebook and Reliance to market a shopping platform can create fear among incumbent e-commerce players and retailers.
However, analyzing India’s current retail ecosystem, both online and offline, and the space Jio Mart is operating in – it will not be easy for it to succeed. Over the last ten years, India’s retail ecosystem has evolved with large e-commerce players like Amazon and Flipkart expanding their reach to the farthest corners of the country complemented with a robust supply chain.
This rise of online shopping had already started preparing offline retailers with technology adoption, improved service quality, etc. For Jio the reach is supposed to be its key strength at present but reach only is not the ingredient enough to win the e-commerce game. Given that the well-equipped incumbents like Flipkart and Amazon, have deeper reach within the targeted online shoppers.
Old formulas that have failed
Jio Mart’s Modus Operandi of running a marketplace platform is a tried, tested, and largely failed model in the context of the Indian market. The challenge of an open marketplace in India is supply dependency on a large decentralized network of sellers and their lack of sensitivity to the quality of service. Early feedback from Jio Mart consumers also validates that.
Managing quality of service even at par with Flipkart and Amazon who operate with their own inventory, and well-managed supply chain and is going to be a huge challenge. We have seen this with platforms like Snapdeal and Grofers among others.
Reliance’s own reputation in Retail
Reliance’s own track record in a dozen of retail businesses operating for over a decade is not greatly inspiring or even threatening to existing players. Reliance Fresh, in the last few years, has closed more outlets than it has opened.
In consumer electronics space, in every region that Reliance Digital operates, smaller family-run businesses dominate the space. The likes of Vijay Sales, Bajaj, Girias, Vasanth & Co. are examples of these successfully run retail chains that give Reliance a run for its money, year after year.
PR stunts don’t always translate to reality
What’s also interesting is the pattern in Reliance’s launches historically. They have massive pre-launch PR projects, mostly aimed at creating fear among the existing players in the space and hype among consumers
In most cases, Reliance begins its PR process a few years before the product even hits the market. We have seen this with all its retail ventures, with Jio and Jio Mart.
Jio mart started making the news for about a year before it finally hit the ground this year. The platform was soft-launched in December 2019. But PR noise can only take you so far. It never wins you the market.
What gets you consumers is a solid value for money proposition and hence large or small players in the business of retail should not at all worry about the PR noise and rather focus on constantly stepping up the value propositions for their customers