Jio-FB deal: Kirana stores to benefit, but the govt must be vigilant

G Krishna Kumar | Updated on May 05, 2020

While the on-boarding of kirana stores onto a digital platform like JioMart will give a fillip to these stores, the government will have to address issues of data privacy and Net neutrality

Amidst the lockdown due to corona, the news of ₹43,574 crore investment from Facebook into Reliance Jio has provided a much needed positive sentiment in the country. The deal means a tie-up between Jio’s e-commerce grocery platform “JioMart” (a platform that would connect consumers with neighbourhood kirana stores) and Facebook’s WhatsApp.

Timing seems right

Jio gets access to WhatsApp’s 40 crore users in India, while Facebook gets access to 38 crore Jio subcribers. It is expected that three crore kirana stores will be onboarded onto the JioMart platform. An opportunity for kirana stores to embrace digital technologies and offer employment. Jio plans to expand JioMart beyond kirana stores and create an ecosystem by bringing in SMEs, farmers, and healthcare workers, among others. Reports already indicate that Jio-FB is aiming for an all-encompassing app like China’s super app WeChat

The internet is already abuzz with the news of JioMart-WhatsApp based service being rolled out as a pilot programme in three suburban areas of Mumbai involving over 1,000 neighbourhood stores.

Will this partnership transform the way we buy daily essentials? Time will tell, but the track record of Reliance in disrupting markets is well known. JioMart is ready to take on incumbent players like Amazon and Flipkart. Reports suggest that online e-commerce is expected to grow seven-fold to $30 billion by 2028.

Will we witness another hyper competitive scenario in the e-commerce space, similar to the one we witnessed when Jio Mobile was launched about three-and-a-half years ago? The government, specifically the Competition Commission of India, will have to actively monitor and ensure predatory pricing is not practised by the new entrant.

The timing for bringing kirana stores onto the JioMart digital platform appears to be right. Several companies have tried to digitise kirana stores in the past. In fact, about 7-8 years ago, a large enterprise software company had tried a similar approach to onboard kirana stores on their digital platform. Lack of success can be attributed to the fact that technology was still evolving, cost of mobile devices, low speed internet, high mobile data tariff and low awareness amongst the kirana store owners.

Things have changed now. A case in point is the wide acceptance of online food delivery platforms like Swiggy with 1.5 lakh restaurants on the digital platform should give confidence to Jio. With the Reliance brand name, much better internet speed and high internet data adoption, coupled with attractive business models would certainly aid JioMart to onboard kirana stores rapidly.

Once a sizeable set of stores are added, JioMart will have access to significant amount of data and by using AI and analytics, the platform can provide insights for providing personalised offers to the consumers. This could also push the neighbourhood kirana stores to come up with innovative methods to woo consumers.

Government must be vigilant

While Jio tries to roll out service across the country, potential concerns on Net-neutrality as Jio and Facebook join hands could emerge. In 2018, India implemented rules for Net neutrality wherein service providers (like Jio in this case) are required to treat all traffic equally, and not charge differently based on content.

The service providers are forbidden from throttling data speeds for any online service, and mandates all content be treated the same. The Telecom Regulatory Authority of India (TRAI) will have its task cut out in monitoring and ensuring Net-neutrality is not being violated.

The other concern can be on protection of personal data considering that India’s Personal Data Protection Bill 2019 (PDP Bill 2019) is still in the works. In fact, a recent article (in The Mint) analyses the privacy policies of Reliance Jio and Facebook and concludes that other than good conscience, nothing can stop the two companies from sharing data as we don’t have a data protection regulator in the country.

In general, a strong regulatory oversight is urgently needed in the Indian context with digitalisation seeing a big uptick across the board. Hope the government will get the PDP law enacted soon.

More competition

Digital payment is another area that is picking up steam in the country. Especially during the current Covid times, digital payments are key to reduce social contact. It is heartening to see several neighbourhood kirana stores refusing to accept cash and preferring digital payments. The National Payments Corporation of India (NPCI) must be enthused with this trend towards digital payments. In fact, a recent report suggests that 42 per cent Indians have increased use of digital payments since the lockdown.

A recent report suggests that the digital payments are poised to increase by five times to reach $1 trillion by 2023. No wonder, foreign companies are keen to play a role in India’s digital payment space. Sample this: Walmart owns Flipkart and digital payments company PhonePe. China’s Alibaba owns over 40 per cent of Paytm. Google Pay and Amazon Pay are also competing in digital payments in India.

The Jio-Facebook deal will provide a tough competition to the incumbent players. Although WhatsApp is trying to obtain approval for rolling out digital payment service, with the deal between the two companies, WhatsApp can lean on Jio’s payment service.

Revival of kirana stores

Back in 2012, when FDI was allowed in the retail segment, it was believed that the neighbourhood kirana stores would vanish soon. While most of them have struggled over the past few years due to demonetisaton and aggressive pricing by retailers and e-tailers alike, it is these kirana stores that have been the lifeline during the Covid lockdown.

A recent report states that 90 per cent of grocery trade in the country happens through kirana stores. This means there is ample scope for many more digital platforms like JioMart and, thereby, create a healthy ecosystem. Making these stores digital should be a win-win for both the consumers as well as the stores, but the government should be vigilant.

The writer is an ICT professional and columnist based in Bengaluru. Views are personal

Published on May 05, 2020

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