Though it is only time which knows what is hidden in its womb, whether the Facebook-Jio Deal will be beneficial for small businessmen as being showcased or it will be like another Jio which has destroyed its competitors.
So in this write-up we will analyze the probable implications of this deal on the overall ecosystem of the grocery business and its stakeholders including Local Kirana Stores, E-Commerce companies (Amazon/Flipkart), E-wallets (Paytm), FMCG Companies, Consumers, etc.
Expectations from Deal
As being highlighted by Reliance that FB-Jio deal will benefit three crores local dealers in growing their business by using digital platform of Jio-Mart . It will improve ” Ease of Doing Business” for these small businessmen. This will provide a quick and good digital transaction platform to both shoppers as well as the customers. Customers will be able to order goods every day from the local shops near the house.
Facts
Before analyzing the implications of Jio-FB deal, lets first note important facts necessary for analyzing the context:
We must know the fact that Reliance Retail Limited (RRL) is already a significant player in the retail business having widespread presence all over India with presence in 6700 towns with a turnover of Rs. 1.30 Lakh Crores. To grow business further, they will certainly see towards Tier-3 and Tier-4 Towns.
It may also be noted that RRL has already signed commercial agreement with whatsApp. As per agreement, whatsApp will further accelerate RRL’s new commerce business on the JioMart platform.
Seeing the number of Local Kirana Stores of 1.2 Crores, it is a fact that there will be hundreds of Local Kirana Stores in a radius of 3-5 KM it self .
Fab Gyan’s Forecast and IMpact of FB-Jio Deal
On Local Kirana Stores
FB-Jio deal will directly impact the survival of Local Kirana Stores due to following factors:
One competing for Local Kirana Stores with Reliance Retail Limited having deep pockets will be next to impossible.
After Jio-Mart, Small Local Kirana Stores will neither have advantage of Information Asymmetry due to availability of complete information about Price and Products across Local Kirana Stores in radius of 3-5 Km on Jio-Mart.
They will nor have advantage of convenience as most probably delivery will be managed by Jio-Mart.
Therefore, Rule of “Survival of Fittest” will work i.e. only Large Kirana Store (or newly opened stockist store) in the radius of 3-5 Km will survive and hundreds of other small Kirana Stores will be closed down as they will not be able to compete with Large Stores in terms of Price and availability of products.
This will create havoc and create problem of unprecedented unemployment and poverty in India. Therefore, we hope that Jio-Mart will consider these probable impacts and amend business model in such a way that it does not impact the survival of Small Local Kirana Stores.
On Amazon and Flipkart
As Jio-Mart in collaboration with Face Book and Whats App will also have deep pockets to compete with Amazon and Flipkart but with added advantage of already having presence and users across the length and breadth of India. Platform of Facebook and Whats App will provide edge to Jio Mart in terms of marketing and consumer engagement.
Further, Jio Mart will be better placed in terms of competition with Amazon and Flipkart as it will not have shackles of FDI Norms and can easily hold inventory and decides prices, which is not the case forAmazon and Flipkart. On Other hand, Amazon and Flipkart are already facing various investigations for violation of FDI Norms.
Also, Jio may use the tag of “Swadeshi” in front of Indians and may try to induce the feeling of Patriotism against Amazon and Flipkart.
On FMCG Companies
As in long term, when Jio-Mart will have significant hold over retail in FMCG sector, it will have every incentive to launch its own Brand in FMCG. Further, it may use its position to have strong negotiation power to decide the Prices.
On E-Wallets (Paytm)
Success of Paytm type E-wallets was dependent on offline transactions especially in these Local Stores. (Online Payment Business is already controlled by Credit/Debit cards). But Jio-Mart will promote recently launched Jio Money on its platform therefore posing significant threat to Paytm.
Further, Chinese investment in Paytm may create statutory and regulatory hassles for Paytm especially after Covid-19 episode.
On Consumers
In Short Term, Consumers will be highly beneficial due to intense competition among Local Kirana Stores at neighborhood level. But in long term it is accepted fact that monopoly in business always hurt the consumers the most.
Opportunity for Young Professionals
Fab Gyan expects that it will create immense opportunities for Young Professionals who can evolve themselves as successful entrepreneurs using digital technology provided by Jio-Mart and develop some niche products at local level.
Conclusion
Though it is sure that it will disrupt the whole FMCG industry whether for Good or Bad that time will tell. But one thing is sure that it will remove inefficiency and dead woods in supply chain and results in success of Fittest. Lets Hope that Jio-FaceBook Deal will create prosperity in the Country.
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Disclaimer:
We are just analyzing and forecasting the probable future events for academic purpose which may not happen at all. Therefore, no legal recourse is available with any of enterprises against fab Gyan on account of this article. Any objection with the article may be emailed to Fabgyan2018@gmail.com .
Information used in article is based on various internet sources, Company websites etc.