Hasn’t it always been a good habit to have cash in our pockets when we step out? Habits - good or bad, have changed in the current scenario, especially in these taxing times, when it is not advisable to venture out unless the goal is to stock up on essentials. With the gradual easing of the lockdown, more and more Kirana shops seem to have come to an un-lockdown epiphany. They seem to have realized, that to ensure their safety as well as that of their customers, it has become imperative to embrace the digital payments.
It is an established belief that the Kirana stores are not going anywhere. If anything, the retail consumers have started to rely even more heavily on them. Despite online sales gaining popularity of late, India is predominantly a cash economy, and the unorganized retail sector is traditionally skewed in favour of offline sales. To co-exist, the integration of mom and pop stores with e-commerce & digital payments companies seems unavoidable.
To diligently drive the vision of our honourable PM's "Aatmanirbharta" and "Vocal for local", the marriage between digital technology and last-mile connectivity seems inevitable. The outburst of the global pandemic has only accentuated the customers' demand for the replacement of cash with non-contact transactions. This is not just the case with Kirana stores, as the COD option has been temporarily discontinued on almost all e-grocery websites. These non-contact transactions come in the form of internet banking or the use of e-wallets such as PayTM, PhonePe, etc. However, the millions of small and medium enterprises in the informal sector aren't technologically, or financially capable of welcoming this new paradigm shift.
Now the question arises, what is being done to improve customer engagement with Kirana stores? Is there a player, with a vision so unique and engulfing, that it ends up impacting millions of shoppers and small businesses?
Reliance, an agglomeration ranging from telecom to energy, sees a tremendous opportunity in the Offline-to-Online (O2O) market space. Having come out of the testing mode very recently, JioMart is a one-stop online destination for grocery shopping and farm produce. JioMart has undertaken a mission to conquer the untapped market of approximately 12 million countrywide Kirana stores. As of May, JioMart has begun operating in 200 cities and towns of India. The presence of a deeply pocketed Reliance (which has already raised dollar 12 billion-plus in Private equity recently) might cause terrible migraines to the likes of Grofers, BigBasket, Flipkart, and MilkBasket, as it starts marching towards its goal of operating in 1000 districts by the end of the year.
The modus operandi is clear - create tremendous value for the 400 million Jio customers by working in tandem with WhatsApp to connect them not just with the Kirana stores, but with the millions of small and medium businesses.
However, besides connecting the Kirana stores with its customer base, is there something else that JioMart could do to create more value for its customers and partners?
A lot is the answer. It could apply for an NBFC license or have a tie-up with an NBFC & an insurance company to meet two important objectives –
Helping small shop owners to meet their routine funding requirements, and
providing them insurance cover at a reasonable cost against potential damages that the small/unorganized shop owners are subject to (such as loss due to fire/flood/theft, etc).
Apart from this, small merchants, who are not very tech-savvy and face challenges of maintaining books of accounts, or businesses that are not resourceful enough to have logistics tie-ups to procure merchandise cost-effectively, or those enterprises that are currently reeling under the pressure of debt among others could offer their set up to Jio under a possible arrangement, whereby Jio would take over the above responsibilities and in return would offer a fixed periodic payment to these small shop owners, to compensate them for their efforts/infrastructure set up cost.
JioMart can reap the benefits of such service offerings in the long run by dominating the complete ecosystem through which a sustainable revenue stream can be established via earnings from telephony service, margins involved in lending and providing insurance, profits earned through managing the logistics, and lastly share in profits that the small businesses will otherwise make.
Unlike Elon Musk’s newborn child’s name, there seems to be no complexity in how JioMart plans to operate.
A single monosyllabic WhatsApp greeting of “Hi” to the business account of JioMart could open the doors of transformation for the 1 trillion-dollar digital battlefield in India.
Once the delivery address details would be furnished, the customer would proceed to place an order from the product list and the nearest Kirana store would be notified of the same.
Once the order has been confirmed, the customer would get a choice on the method of payment, where Jio through offering certain incentives, might egg the customer on to use either its own UPI payment wallet - JioMoney, or to use WhatsApp Pay once it goes live countrywide.
Facebook's strategic investment decision of $5.7 Billion in Jio platforms for an exchange of 10% stake is an extremely astute one. This investment came at a time when Facebook-owned WhatsApp was struggling with a country-wide rollout of its payment service. This strategic joint venture (with obvious backing and lobbying support from reliance) could help WhatsApp accelerate its already late entry into the party of digital payments.
Flanked by competition from all sides, a well-capitalized Reliance has picked its battles with commensurate players such as PayTM, Amazon, Flipkart, among others.
“He who knows when he can fight and when he cannot will be victorious” - The Art of War by Sun Tzu. Clearly, this is a battle Mukesh Ambani knows he can fight. JioMart has indeed forayed into a space surrounded by fierce competition, but it should be noted that Reliance (India’s most valuable company) has sufficient money muscle on its own (Reliance industries posted a net profit of Rs 39,880 crores for the FY 2019-20).
If the enormous profits weren’t enough to plough back into JioMart, Jio platforms raised a staggering Rs 97,885.65 crores in exchange for a 21.06% stake sale to global marquee investors.
Aside from enabling Reliance to achieve its goal of being debt-free by 2021, these funds raised alongside the technological and operational expertise of the above marquee investors might just help Reliance to cover a mile while the others are still covering a foot.
With digital payments and online delivery becoming the norm, more path-breaking business models will emerge, encouraging small retailers to adopt the infrastructure. Since profitability in the payments and the delivery business solely is likely to remain a challenge, companies like Reliance need to offer more and more value-based services such as lending and insurance, to not only make the small businesses “Aatmanirbhar” but to also realize significant returns off the huge bazooka of investment that has been fired to conquer the e-commerce and payments business.
Whether it is planning an upcoming overseas IPO, or a new marquee investor taking up a stake worth thousands of crores of Rupees, Mukesh Ambani whilst working from home has kept the media and the Dalal Street on its toes. The only thing we can do currently is to sit tight, fasten our seat-belts, and prepare for a roller coaster ride as Mr Ambani plans and executes the unthinkable.