Reliance plans to create the world’s largest online-to-offline ecommerce platform in India called New Commerce. It is connecting its 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.
Indian grocery retail and kirana
The food and grocery category is big business in India and will contribute around 66 percent of total retail revenue by 2020. While the category represents an attractive market, companies often struggle to service traditional stores.
Servicing mom-and-pop stores is difficult — as they have high last-mile delivery cost, limited cash flow, and credit hungry shop owners. Kiranas are difficult to service — as they often don’t have street addresses and are in congested areas with narrow streets.
But companies are discovering the potential of kirana shops. Their large footprint and close working relationships with customers make them an ideal pick-up point for online shoppers. In return, kirana shopkeepers are paid a commission for product storage and delivery to customers.
Reliance Industries is creating an online-to-offline ecommerce platform connecting kirana stores to its network. The retailer is digitising retail stores and wants to expand its retail presence to over five million outlets in India by 2023. JioMart has already launched in more than 200 cities — leveraging Reliance Retail’s store network and its partnerships with kirana stores across 20 cities.
It is installing Jio mobile point-of-sale (POS) devices at kirana stores and connecting it to its high-speed 4G network. The Jio POS system can be used for placing orders, scanning barcodes, billing, facilitating credit card payments, and calculating goods and service taxes. 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.
Facebook announced in April this year that they are investing $5.7 billion in Jio Platforms. The collaboration allows consumers to order products via WhatsApp, but purchased at their nearest kirana store with Reliance’s online-to-offline (O2O) model. The model uses kirana stores as a fulfillment centre and links inventory to the nearest kirana store — not a large warehouse.
Traditional trade digital adoption
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.