The looming threat of Reliance Retail's move into e-commerce business in India has been hanging over Walmart (WMT +0.99%) and Amazon (AMZN 0.87%) for quite some time now.
Led by India's richest man, Mukesh Ambani, Reliance Retail has been gradually testing the waters of India's e-commerce space that is currently dominated by Amazon and Walmart subsidiary Flipkart. And now, Reliance Retail's online grocery platform, JioMart, has started making swift inroads through quick expansion into several Indian cities thanks to the company's existing infrastructure.
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Reliance Retail's JioMart scales up rapidly
In January, Reliance Retail started testing the JioMart platform in three suburbs of Mumbai, the country's financial capital. The company was delivering 50,000 grocery products to customers during the pilot phase, along with attractive perks such as free home delivery irrespective of the order value and a no-questions-asked return policy.
At that time, Reliance Retail was aiming to connect 30 million local offline retailers in India with over 200 million households with the help of JioMart. It took the next step in February with the launch of 18 small-format grocery stores that were located closer to neighborhoods. These small stores are a scaled-down version of Reliance Smart stores, which are typically bigger in size and are located at a distance from residential areas.
Given that Reliance had more than 600 Smart and Fresh stores selling groceries in India, it was only a matter of time before the company was able to expand its presence across the country. And in just over four months since the first pilot was carried out, JioMart is now delivering groceries across 200 cities in India.
Customers can now order fruits, vegetables, dairy, bakery items, beverages, personal care items, and other household products from JioMart. The platform is promising a minimum discount of 5% on items purchased, though a cursory glance at the JioMart site suggests that there are much bigger discounts on offer.
Reliance Smart and Reliance Fresh are currently servicing the JioMart platform, but the next step of the company's plan could see it scale up at a much greater pace. JioMart has reportedly been testing (Facebook (FB 3.77%)-owned) WhatsApp-based orders in the three Mumbai suburbs where the first pilot was carried out.
TechCrunch reported recently that customers could simply send a WhatsApp message to JioMart's business account. The message then gives customers access to a link that would help them place orders for groceries from 1,200 neighborhood stores. On placing the order, JioMart would assign a neighborhood store to the customer to fulfill their requirements.
This could be Reliance's big play in the Indian grocery space as its Jio telecom arm has over 370 million subscribers, making it the largest telecom operator in the country. What's more, Facebook recently invested $5.7 billion in Reliance's Jio Platforms for a 9.99% stake.
WhatsApp has more than 400 million subscribers in India, its biggest market. So, Reliance and Facebook can together leverage their wide reach to connect local store owners with potential customers to expand JioMart's reach.
This could pose a big challenge for Amazon and Walmart. Both companies have been looking to expand their presence in the lucrative online grocery space in the country, but JioMart's strategy and existing infrastructure could help it move quickly in this space.
Amazon and Walmart are ready to face the challenge
Nielsen estimates that there are 12 million mom-and-pop stores in India, and JioMart is looking to leverage their reach to expand its business. But Amazon and Walmart have been working on this model as well.
In April, Amazon India launched a program known as Local Shops on Amazon to utilize the vast network of local mom-and-pop stores in the country. The project was launched after a six-month pilot project involving more than 5,000 local shops and offline retailers.
This program will not only enable local stores to list their products on Amazon, but it also allows them to act as pick-up and delivery points for the e-commerce giant. Amazon has enrolled local stores including furniture retailers, electronics sellers, grocery shops, and medical shops under this initiative.
Walmart-owned Flipkart has made a strong push to recruit local stores into its ecosystem as well. The company has partnered with more than 10,000 local stores in India that are spread across 700 cities and 20 states as a part of a program called BuyZone. Additionally, the company has also enlisted 27,000 local mom-and-pop stores in Tier-II and Tier-III cities in India to boost its last-mile delivery capabilities.
So, Amazon and Walmart have already made inroads into the wide local store network of India, which means that JioMart won't be having a free hand in the country. Additionally, Amazon and Walmart could incentivize small stores in a better way as they sell products beyond groceries, such as smartphones and televisions.
Considering all of this, Amazon and Walmart could continue holding their own in India's consumer discretionary space, despite the impending challenge posed by Reliance's JioMart.
