Reliance Jio may forever change the way you buy things
One of India’s biggest business battles is being fought on a tiny field. Amazon and Flipkart, which dominate India’s online retail, are priming their pumps with billions of dollars but still just skim the surface of India’s $650-billion retail sector. E-commerce constitutes only 3-4% and just 8% is controlled by organised retailers such as Big Bazaar. The vast remaining market has yet to be touched by e-commerce.
That’s the new battleground Mukesh Ambani will open up in 2018.
As internet penetrates Bharat and phones and data become cheaper, the e-retailers wait for Indians in the hinterland to get online and buy stuff from them. But Ambani is planning to race ahead of e-retailers and catch the hinterland consumer while he is still fiddling with his first smartphone. Instead of trying to wean the hinterland consumer away from Kirana stores, he will take e-commerce to the brick-and-mortar, upstaging the incumbents and forever changing the way you buy atta-dal or laptops.
Ambani is getting all his ducks in a row, and he will shoot in 2018. His magic bullet is Reliance Jio, the rookie that rattled the telecom sector.
In 2016, India’s oil czar entered the telecom business riding on freebies. Reliance Jio sent the rivals scrambling for cover. Bruised and demoralised, many were forced into mergers, buyouts and shutdowns. Jio has cornered nearly 15% of revenue market share.
Now Jio is trying to force its way into online retail. Expect bloodshed and mayhem as it is armed with a killer idea. While Amazon and Flipkart are fighting against the brick-and-mortar retail, Jio will redraw the battle lines by roping in neighbourhood stores.
Offline is the new online
The imminent death of the brick-and-mortar retail in the West may not be the immediate future of Indian retail. E-commerce might take a decade to corner the biggest share of Indian retail. Ambani is shrewd enough to notice that. That’s why he has chosen to ally with the traditional retail—the kirana stores—instead of waging a war on them. Ambani’s plan to storm the retail sector in 2018 riding on Reliance Jio is based on this realisation.
Reliance Jio is running a pilot project in Mumbai, Chennai and Ahmedabad of its ‘digital coupons’ model. Shoppers—the Reliance Jio subscribers— are given digital coupons of different brands on its Jio Money platform or through text messages with which they can buy discounted products of these brands at neighbourhood shops.
The company will charge brands a fee for using its platform for ‘below the line marketing,’ which is a money-saving advertising option for companies involving the distribution of leaflets and other such promotional material.
The clever plan to link brands, kirana shops and consumers through the growing Reliance Jio network can spread like wildfire in the hinterlands. While e-commerce is still years away from small towns and villages, locals have already started using their phones for commercial transactions. Reliance Jio is eyeing these crores of consumers and lakhs of Kirana stores.
After the insights from the pilot project sharpen the strategy, Reliance Jio will roll out the business in 2018.
Jio is coming
Offline-agnostic e-retailers could be stumped by Ambani’s online-to-offline play. Before they respond, Ambani might have captured a big chunk of traditional retail with his quick and easy ‘digital coupons’ business. He may confine the warring Amazon and Flipkart to urban markets and make it difficult for them to spread to the hinterland. Ambani’s deep pockets and an intuitive understanding of the Indian market can propel his venture to the leadership status. In five years, he can leave the incumbents far behind. Ironically, they might find themselves struggling a few years later while their enemy—the Kirana retail—might still be around.
Who will be the king?