The biggest headlines is that Jio and Facebook have come together for a bigger cause. The tech giant, Facebook, had acquired a roughly 10% stake in India’s favorite company, Jio. This deal was sealed for $5.7 billion. As covered in our previous article, we have mentioned what actually went down for the deal. How it happened, what happened, who will get affected etc. both the players are extremely popular in their segments. Jio holds a majority stake in the Indian market and is a trusted brand in every household. While Facebook is a conventional and old brand, used by almost everyone.
This is a win-win deal for both the sections and the firms as the messaging and social media services of WhatsApp have been extremely popular and widely used in India while jio is the one providing the connection facilities for it. There have been a few legal concerns related to permissions for Facebook when it wanted to offer free internet to the people. Facebook is not operational in china with the business tactics, but it is now in the second-largest market, India. Reliance will be using WhatsApp for delivery of messages and to speed up the communication channel. Jio has also received a lot of money from Mark which will help in covering a lot of debt. This is the biggest FDI investment in India. They aim to enter the grocery sector and flourish in it by expanding it largely.
Now, it is being contemplated whether this new tech giant will create any hurdles or not. Online grocery portals were doing quite well last year. About 30-40% to the total consumer base shifted to the subscription-based programs. These platforms were so strong that they could actually go ahead with the subscription-based programs in 15 months of their inception. I mean which Indian, pays for subscriptions? It is downright wrong for the Indian mentality. But these platforms were so popular, they actually made it happen. The major drivers of the surge in subscriptions were affordable rates, various benefits like price savings through cashback, coupons, and priority free delivery. Grofers and BigBasket made a huge name for themselves.
The online grocery market continues its rapid growth spree with 106% growth recorded in the first quarter of 2019 and since the start of the pandemic, people have resorted to ONLY digital shopping so this number has gone further up. Various verticals continue to drive growth in the market, primarily using convenience-based levers like assortment, express delivery, and subscriptions.
Moreover, quite a few people have been shopping from the local kiryana stores for their necessities. These stores have a personal connection with their customers and are well versed in customer preferences, which in turn enables them to stock locally relevant products. Indians prefer buying their monthly supplies from these local stores for various reasons such as close proximity, availability of credit, and the option to return/exchange products.
The Indian grocery market accounts for about 70% of the total retail market in India and has a lot of competition and opportunities. People have entered this market, made profits and have become the kings. Others made losses because they didn’t study the market well. There is about 90% distribution through the local kiryana stores which is rapidly changing due to following social distancing. Even as retail giants battle against each other to become the consumer’s habit when it comes to buying grocery, the small stores have held their ground.
Now, if we look at the Jio-Facebook scenario, they aim to connect small retailers through WhatsApp with the consumers. After this step, the payment will be done through the new channel set up by jio. They will obviously have a cut in this. And due to the pandemic, more and more people want to be registered with online modes of shopping. Paytm alone has received 72% more requests for onboarding of various shops. The whole timing of this merger is very strategic. People are no more afraid of going online, rather they desperately want to go ahead with the new technologies.
Now if we consider the already existing stores, Amazon Pantry, Grofers and BigBasket, these companies are running from years and after so much struggle, they have reached a good level. Amazon took two decades to make some profits. But when we look at jio, it came in 2016 and more than half of India is using it. Facebook came in and wiped out orkut overnight. There is something unique in these models which always gives them an upper hand. They will start by eliminating competition. A company can only work in India if it gives a whopping discount. The major reason for jio companies’ success is that it understood the root cause of all Indian and human issues, money shortage. Then they targeted it and used it for their own good. Jio gave away free sim cards for three whole months with internet connection. They gave sim cards to the poorest of the poor and set up a name for themselves in every house of India. Later, after three whole months, they decided to start charging for it. People became addicted to the internet and started paying for it. Similarly, jio mart would sell a bread for Rs20 while Grofers, Big Basket and Amazon Pantry would be selling it for Rs23. According to the Indian mentality, there exists zero brand loyalty and people will obviously go for Jio Mart. As always, jio will emerge as the winner. Later, the already existing brands will lower their price and this will create a lot of havoc in the market and will spread like forest fire.
This is the time when the already existing brands can gear up and make or break something. Time is ticking and so is the technology. Maybe the already existing companies can come together and create a bigger and larger market plan for sustainability because later on when the biggest business man, Ambani and the tech hero, Zuckerberg, come together, it will be a war!