The rise of online shopping has hurt Mahendra Chaudhary, whose hole-in-the-wall pharmacy in a Mumbai suburb is stacked high with everything from medicine to chocolate.
Online pharmacies have been undercutting him by 20 per cent to 30 per cent and customers increasingly come to him for trivial items such as sachets of shampoo costing a few rupees. Anything bigger and they turn to his online rivals. “I can’t offer discounts like they do,” he said.
But for six months, Mr Chaudhary has been a guinea pig for a new service that he hopes will turn round his fortunes; an attempt by Mukesh Ambani, Asia’s richest man, the head of oil, retail and telecoms conglomerate Reliance, to take on the likes of Amazon and Walmart-owned Flipkart.
According to analysts, Reliance is the only Indian company with the resources to gatecrash the online shopping sector, in the same way that it reshaped the country’s telecoms sector by offering ultra-cheap mobile data.
“Whether it’ll be successful, whether it’ll be rolled out on a national level, remains to be seen,” Arvind Singhal, chairman of consultancy Technopak, said of Reliance’s foray into ecommerce. “But if they’re able to crack this . . . they’ll be the only guys in town.”
The new platform, JioMart, which has started signing up customers for a soft launch in suburban Mumbai, plans to tap India’s millions of small retailers, such as Mr Chaudhary, known as kiranas.
Customers order groceries and staples through JioMart, which will then be delivered to them from nearby shops. Shopkeepers can use a handheld Jio terminal to enter what goods they have available, and also use it to order new stock from Reliance’s network of wholesalers.
To tempt shoppers, JioMart will offer free delivery and returns, and discounts of up to Rs3,000 ($42) for early customers. To sign up shopkeepers, there is the promise of more customers and cheaper wholesale goods.
The venture is another piece of Mr Ambani’s strategy to create a homegrown digital giant. Analysts said Reliance’s ambition is to use the data it amasses from JioMart to offer further services, including helping businesses with resources such as cloud computing.
It also wants the 350m people who use Jio’s mobile network to use its apps for everything from online shopping to streaming music and movies. “The holy grail for us is that . . . you come directly to us,” one person familiar with the company’s strategy said.
Online grocery delivery is one of the fastest growing parts of India’s $60bn ecommerce market, with annual sales growth rising to 87 per cent, according to consultancy AT Kearney.
Only days after Reliance started signing up customers, Amazon announced a tie-up with Indian retail group Future, in which it already has a stake. The US platform said it would start delivering groceries from Future supermarkets to customers within two hours in major cities, in an attempt to meet the challenge posed by Reliance’s new platform.
But Amazon and Flipkart face other obstacles. A regulatory change last year restricted the ability of foreign-owned companies to sell their own inventory, rather than third-party goods, to shoppers, curtailing a lucrative part of their businesses.
Mr Ambani first revealed plans to launch a “new commerce” venture in January last year, only weeks after the regulatory tightening was announced. Being Indian, Reliance is not subject to the restrictions, leaving its wholesalers free to supply kiranas with the same juices or detergents that consumers will eventually buy on JioMart.
“It’s not a level playing field,” Mr Singhal said. There “are huge disadvantages to international retailers”.
Part of Reliance’s ecommerce pitch is that it wants to help the country’s multitude of small retailers rather than compete against them. “These highly energetic and self-motivated entrepreneurs have suffered,” Mr Ambani said in August. “In the true Reliance ethos, we are working towards enriching and empowering them.”
Another person familiar with Reliance’s strategy said these shops already have legions of loyal customers, which will save Reliance having to build a network of couriers from scratch. “Kiranas are [very] relevant to the customers in their vicinity,” the person said.
But analysts said Reliance’s strategy also brings logistical challenges and risks, such as the possibility of lapses in quality.
“There’s very little scope for giving unfresh products. If you do that once, the customer never comes back to you again,” said Mrigank Gutgutia of consultancy Redseer. “They’ll have to do something extremely different from what has been done in the past to make this work at scale.”
In Navi Mumbai, an industrial satellite city about an hour from India’s financial capital, shopkeepers were gingerly adapting to the new platform, taking payments and managing inventory with the Jio device but not yet making deliveries. Getting them to change ingrained habits, including abandoning existing suppliers, may be hard work.
Laxman Jawal’s pharmacy recently ordered its first batch of goods from Reliance’s wholesaler: a consignment of soaps, deodorant and other products delivered in large Jio-branded containers. He said the order was easy to make and delivered efficiently, and he was keen to do it again.
But Bhagwan Lal, who did not own a card machine before signing up, finds the device confusing. When he recently wanted to order some biscuits, he waited for a Jio representative to come to his shop and do it for him. In the meantime he uses his existing suppliers instead. “I’ll learn,” he said.
Mr Chaudhary, meanwhile, said he is yet to see any significant advantages. “I don’t know whether it’ll benefit us,” he said. “I’m happy if they work with us. But if they only think about their own profits, it’ll be disappointing.”
Additional reporting by Andrea Rodrigues
