Reliance Jio shaping up to be India’s Alibaba

As Mukesh Ambani build Jio from his decades-long understanding of India’s low-cost bargain-hungry consumers, amidst all the moves, getting it right is key because Reliance now casts itself as a technology and retail company. Its start was from textiles into petrochemicals and oil refining.

A few years ago, Reliance Jio entered the already overpopulated red-ocean of the telecom sector. They obliterated everyone with their ultra-low-cost data plans and free voice calls, resulting in them becoming the country’s largest wireless operator with a subscriber base of 400 million.

With $20 billion raised for the technology venture, Mukesh Ambani and Co. have shifted their focus to Reliance Retail, India’s largest brick-and-mortar retailer, already raising $6 billion from heavyweights like KKR & Co. and Silver Lake. With such behemoths’ backings, JioMart’s online ambitions pit them against Amazon and Flipkart, who combined control over 63% of India’s eCommerce market share.

With Reliance Retail, Ambani seems to be deploying a very similar tactic — offering cutthroat pricing and crazy rebates to India’s bargain-hungry and low price loving customers to gain an advantage in the rat race for the lean in the overcrowded red ocean of the retail space. Because of the COVID pandemic, many shoppers resorted to ordering everything online, a trend that is unlikely to die down, even if malls and shopping areas are deemed safe.

Not just cutthroat pricing because of his deep pockets to be able to afford such discounts, other factors have worked as well:

Local policies and taking advantage of rules

In 2013, India’s government tweaked rules to create a ‘unified license,’ allowing wireless broadband operators to provide voice calls with a one-time fee. Jio was the only one who had that permit in the country. These new rules helped it moved swiftly, allowing Jio to move swiftly and, in September 2016, launch data and voice plans at rock bottom prices. The move made digital services affordable to million, allowing them to become the biggest wireless operator with over 400 million subscribers.

In retail, India’s policies are stacked in favor of domestic retail, Jio being the biggest one.

- Since 2018, India’s FDI rules barred Amazon and Walmart from owning inventory and featuring exclusive products.

- Foreign companies are not allowed to own more than 51% of brick-and-mortar stores. Even that limit is subject to conditions such as setting up only in cities with less than 1 million populations.

With JioMart’s local low-cost procurement, taking Kirana shops online, and chain of brick-and-mortar stores, they can shake up online e-commerce.

High Stakes and Market Complexity

For Ambani and Co., the e-commerce push will be tougher than telecom for sure because the stakes sure are damn high!

First, he’s up against Amazon, where Jeff Bezos has pledged to invest more than $6.5 billion, and Walmart, who have invested over $1 billion in Flipkart and steadily increased investments in PhonePe. Compared to telecom, it’s a much more formidable battleground, where most of the players he defeated were homegrown players.

Second, ongoing delivery failures and refund delays. With the technology arm stepping up, this seems solvable in the near feature.

The market and policies would favor Reliance for sure. After the government ruling, in 2019, creating complex price restrictions, Walmart and Amazon have offered discounts via manufacturers and brands. In a few cases, tie they restructured deals/relations with vendors to legally offer discounts and tied up card companies to offer deals on their websites. Yet, conditions favor the local companies in the long run, meaning JioMart can tweak costs because fewer restrictions bound them.

At the moment, according to Technopak, JioMart + Reliance Retail accounts for $12 billion of India’s retail market, whereas Amazon and Flipkart can claim about $14 billion. While the latter have established their presence online, the real winner will need expertise in both domains, physical and virtual, to cater to India’s diverse presence across Tier 1 cities and a rather heavy and diverse Tier 2 to Tier 4 cities.

Flipkart’s investment in Aditya Birla Fashion may be a sign of its move into offline retail. Reliance Retail already is India’s largest brick-and-mortar retail chain. They also acquired all the retail, wholesale, logistics, and warehousing units of Future Group for $3.4 billion in August 2020, a move currently held up in legal controversy after Amazon got a stay order for the deal in Singapore.

The right moves

JioMart made a soft launch in December 2019 in selected areas outskirts of Mumbai. With the lockdown and opportunities in e-grocery emerging, Jio seized the opportunity, expanding to over 200 cities at a time when established players like Grofers, Swiggy, BigBasket limited their presence, giving Jio a much-needed advantage: a pan-India presence with a well-established supply chain, and omnichannel approach by partnering with Kirana stores.

Fact: India has over 10 million Kirana stores that account for 90% of grocery retail.

Results: Its availability in cities meant in Q1 (April — June), the app averaged over 400,000 orders a single day. Q2, the company has been rapidly scaling up with a consistent increase in orders and customer base.

App downloads are surging

Analysts at KPMG predict that JioMart will control 50% of India’s grocery segment by 50%. An early indication is that over 67% of new app downloads between July — October 2020, between JioMart, BigBasket, Grofers, SuprDaily, and MilkBasket was JioMart.

Market share for new app downloads: July-Oct 2020 | Image: BI India

While this does not conclude purchases, it’s a mighty good start from an initial customer acquisition perspective (Acquisition of AAARR product management metric framework)!

Tapping newer avenues

JioMart has forayed into fashion and consumer electronics. They are also working on:

- A subscription-based delivery model for daily delivery, similar to Big Basket and Swiggy’s Supr.

- Private label offerings, similar to Grofers and Big Basket.

Remember, Amazon also began with books.

WhatsApp Pay and WhatsApp Shopping boost?

WhatsApp announced a wider launch of WhatsApp Pay, rolling out to 20 million users. WhatsApp Shopping is a feature that allows users to quickly look at the catalogues offered by businesses on the platform.

Facebook’s $5.7 billion investment in April means JioMart would be able to leverage the large user base in India via the Shopping feature. WhatsApp Pay’s integration with JioMart will give Facebook a much-needed kickoff boost for the feature.

WhatsApp’s new features can significantly boost JioMart’s ambitions | Image: thequint

Could Jio be India’s Alibaba?

Over the years, Reliance has aligned its vision to the governments’ across different administrations. They launched Jio’s telecom business in 2016 and promoted it as a part of Modi’s Digital India.

Narendra Modi’s policies and frameworks indicate that he wants the nation to have an Indian equivalent of Alibaba. Remember, China’s protection of domestic companies created tech giants in Alibaba and Tencent.

While Ambani is building Jio towards Modi’s ambitions and laying the foundations of JioMart on his decades-long understanding of India’s low-cost bargain-hungry consumers, amidst all the moves, getting it right is key because Reliance now casts itself as a technology and retail company. Its start was from textiles into petrochemicals and oil refining.

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