They said it was like comparing apples to oranges and oranges to pineapples. East is east, and West is West, and never the twain shall meet.
Different strategies are deployed across different channels to grow the share of business: differentiated product-lines, BTL activities, promotion schemes. It was also said that the share of general trade would reduce over a period of time, to be eaten up by Ecommerce and modern trade eventually.
Cut to 2020.
A year that has upended all expectations and norms. A year that has given people a staggering jolt where they are forced to leap before they look, fly before they learn to run. Interesting dynamics have emerged in these times of pandemic in the Indian retail space. While the sales of FMCG products have been impacted in the July quarter across both – the General trade and the Modern trade, GT saw a slump in the early months of lockdown in April & May on account of store closures with a revival in June as India unlocked, MT saw the opposite trend – it saw a spike in sales in April & May, and tapered sales in June as footfalls dwindled as people became more wary to step out due to fear of contracting infection and relied on eCommerce and their local Kirana guys to do the home delivery.
This crisis has pushed companies to go belly-up or shed their weight. While systemic issues had already started showing up for Kishore Biyani’s Future group businesses in mid-February due to its mounting debt, the pandemic pushed it further down the road as it depended completely on the cash flow to service its loan. It has survived so far solely because of the government’s stimulus measures – RBI’s loan moratorium and the suspension of the Insolvency & Bankruptcy code (IBC) has ensured that the lenders do not take Future Group to task while the group was still reeling under the effect of COVID-19. Kishore Biyani selling most of his business operations to Reliance as he finds himself stuck between a rock and a hard place.
On the other end of the spectrum, is Reliance. In quite a remarkable way, it has pivoted to avoid perishing. Reliance’s Jio, which had broken the backs of many a telecom giant with its completely disruptive entry in 2016, looks to do the same with JioMart. And it seemed to have set its sail on the back of winds of change blown by the Coronavirus. As an example, let us consider the grocery orders. During the lockdown in April, Big Basket had peaked at the daily orders of 300,000.
By July-end, JioMart – a two-month-old baby, had already beaten Amazon and Big Basket. JioMart has been generating a daily order book of 250,000 orders trumping Big Basket’s 220,000 & Amazon’s 150,000.
It is quite amazing, that it had strung a series of technology partnerships within a short period, primarily the one with Facebook, to fuel its online to offline retail strategy. Along with the entire Reliance retail arm with 11,000+ outlets across the country, it has more than 13,500 Kirana stores registered on its platform which would grow to 30,000 before the festive season. It will also, in all probability, buy out all the 1700 stores across different formats from Future group.
Reliance has become this unstoppable juggernaut, a force to reckon with – that had changed traditional ways of thinking. Primarily a Modern trade player, it has carved out a place for itself in eCommerce while it is also straddling on the other end in General trade by onboarding Kirana stores on its JioMart platform.
It is increasingly blurring the lines between these three channels of doing business. The way it is doing is, on one hand, it is working as an aggregator between customers and nearby stores, on the other hand, it also serves as a procurement and delivery channel between Kirana stores and the manufacturers. Talk about blurring lines!
JioMart is neither the first, or the best to do this. There have been quite a few tech start-ups that want to completely revolutionize the way we buy from GT, Amazon Wholesale being one of them. To put an inventory management system in place, demand generation, & electronic order and billing for the small mom-and-pop stores – JioMart isn’t the first company who dreamt of doing that. There is a reason why there aren’t many start-ups in this space. It is quite difficult to set-up a distribution network, and at this juncture, it doesn’t seem that Reliance is successfully inching towards that goal.
Reliance Achieving Holy Trinity
In theory, JioMart is planning to give a strong competition to e-commerce platforms such as Amazon, Big Basket, and Flipkart, completely dominate the Modern Trade space with the Reliance Retail – Future Group combine, and also act as a mammoth distributor which would help the mom-and-pop stores increase their revenue through its tech play.
It definitely seems to possess immense muscle power to drive the change across. But it remains to be seen how successful it is in this endeavor. Though the lines are getting increasingly blurred at the other end of the spectrum as well. So far, FMCG companies deploy different teams to function and win in GT, MT and E-commerce space. They have different strategies on marketing and sales to drive growth across the three channels. But when the large retail players are trying to enter the e-commerce space and the e-commerce giants are trying to buy real estate, there is a great alignment in strategies employed by MT and e-com teams within FMCG companies, and in the future – there is a very real possibility that they might be merged as they have increasingly common goals.
According to one industry insider with whom the author of this article interacted, while the eCommerce sales in the FMCG space has increased, the penetration hasn’t increased that much. This means that the same set of people are buying more goods than before, yet new customers aren’t being acquired at the same pace. In these times, people are buying more from the local mom-and-pop stores than before. And JioMart is simply displacing Reliance Retail sales.
While that may seem like pouring cold water over whatever we said earlier, only time would tell how it all pans out. Whatever may be - times they are definitely a-changin'.
Author: Vismay Harani