Reliance plans to create the world’s largest online-to-offline ecommerce platform in India called New Commerce. It will connect it’s a high-speed digital platform to mom-and pop stores, which can be used as fulfilment centres for customers.
India’s retail market remains highly fragmented, with 90% of retail taking place in mom-and-pop stores, also known as kiranas. According to market research agency Nielsen, there are 12 million kirana stores in the country.
Food and grocery is big business in India and will contribute around 66 percent of total retail revenue by 2020. While the food and grocery category represents an attractive market, companies are often left without a viable strategy to service traditional stores.
Servicing mom-and-pop stores is difficult — as they have high last mile delivery cost, limited cash flow and credit needy shopkeepers. Kiranas are also hard to service — as they often don’t have street addresses and are in congested areas with narrow roads.
But companies are discovering the opportunity that kiranas represents. Their large footprint and close working relationships with customers make them an ideal pick-up point for online shoppers. In return, the kirana shopkeepers are paid a commission for product storage and delivery to customers.
Reliance Industries plans to create an online-to-offline e-commerce platform connecting kirana stores to its network. The retailer has 15,000 digitised retail stores active and wants to expand its retail presence to over five million in India by 2023. It plans to install its Jio mobile point-of-sale (POS) device at kirana stores and connect it to its high-speed 4G network. The company has already spent around $36 billion on Jio and its nationwide 4G network infrastructure.
The Jio POS system can be used for placing orders, scanning barcodes, billing, facilitate credit card payments, and calculating goods and services tax. Brand owners will also benefit from Reliance’s technology — providing them with better data analytics and the opportunity to offer targeted promotions. It plans to add more services — and recently introduced an app which will enable mom-and-pop stores to create and launch their own chatbot with customers.
Traditional kirana stores are increasingly more willing to adopt technology — especially in big urban centres. According to a RedSeer report, almost 70 percent of kirana stores in big cities and 37 percent in tier II towns are prepared to use technology in their stores
Companies such as Reliance, see an online-to-offline retail model as an engine for growth in India. Mobile technology is also fuelling ecommerce, and India will have an estimated 800 million smartphone users by 2022, according to Cisco Systems. The appetite for online food and grocery shopping will only increase — and the modest kirana store could be an important player.