17/09/2020 Jiomart: Why JioMart will be a disruptor in Indian retail, and its likely impact across the value

ely impact across the value chain - The Economic Times

Swarnabha

English Edition | E-Paper

Home ETPrime Tech Consumer Markets Corp Gov Telecom + OTT Auto + Aviation Pharma Fintech Economy More

Business News › Prime › Consumer › Why JioMart will be a disruptor in Indian retail, and its likely impact across the value chain

STRATEGY

hy JioMart will be a
disruptor in Indian retail, and
its likely impact across the
value chain
Image credit: Google Playstore

Synopsis

JioMart and its competitors are likely to capture 3%-5% of the total FMCG and grocery market in a few
years. That, in itself, will be a massive disruption. But JioMart will have to allay the concerns of thousands
of general-trade distributors and not excessively encroach upon their livelihoods.

Over the past few months, one of the most

engaging conversations among leading FMCG
and grocery companies has been about the
potential impact of JioMart on their
BY

Sandeep Das
businesses. There is a certain amount of 5 MINS READ
palpable excitement and tension as business Sep 16, 2020, 01:33 AM IST

https://economictimes.indiatimes.com/prime/consumer/why-jiomart-will-be-a-disruptor-in-indian-retail-and-its-likely-impact-across-the-value-chain/primearticl… 1/7
17/09/2020 Jiomart: Why JioMart will be a disruptor in Indian retail, and its likely impact across the value chain - The Economic Times

leaders try to make an intelligent guess about Share This Article

the impact of JioMart.

The moot question: After the resounding

success of Jio in telecom, will JioMart end up 3

being a massive disruptor or an incremental FONT SIZE SAVE COMMENT

enabler? Will every stakeholder gain in the

process or will JioMart boot out the general-
trade distributor and the parent FMCG?

This article explores the potential impact of

JioMart on the end consumer, trade, and
FMCG and grocery companies.

hat it means for the end consumer

There is a clear value proposition for the end
consumer with doorstep delivery, a large
portfolio, and the trust of the local kirana
stores. As a result, it is not surprising that
JioMart was among the top three downloaded
shopping apps in August 2020 after Flipkart
and Amazon. Given that the total consumer
base is likely to remain the same, there is
bound to be a certain amount of shift from the
modern trade (12%-14% of the total market)
and e-commerce consumer (3%-5% of the total
market) rather than the general-trade
consumer.

The modern trade and e-commerce consumer

values convenience and portfolio range a lot
more than the general-trade consumer.
Although there will be a certain degree of
traction among general-trade consumers, the
overarching need for touch and feel while
buying groceries and vegetables might make
visiting the local kirana a necessary step.

Clear value bene t to the local kirana

Like the end consumers, there is a clear value
bene t for the local kiranas. With increasing
automation and visibility, they are bound to
bene t from better management of inventory
and working capital. However, kiranas have
had decades of association with the general-
trade distributor. Hence, JioMart will not only
need to replicate the model economics (credit
of 20 to 30 days), but also drive servicing at

https://economictimes.indiatimes.com/prime/consumer/why-jiomart-will-be-a-disruptor-in-indian-retail-and-its-likely-impact-across-the-value-chain/primearticl… 2/7
17/09/2020 Jiomart: Why JioMart will be a disruptor in Indian retail, and its likely impact across the value chain - The Economic Times

short notice (typically a couple of hours) and

thrive with timely issue resolution around
month-ends.

Once the model scales up, there might even be

potential for a platform-loyalty programme for
the end consumer, driving more tra ic. As
mentioned earlier, there is a potential for
increasing tra ic with a marginal shift from
the modern-trade consumer.

JioMart’s biggest test

General-trade distributors are very important
stakeholders, with nearly 77%-80% of FMCG
and grocery owing through them. Besides the
business salience, this group is very in uential
politically. In 2019, there were reports of nearly
400,000 distributors threatening to boycott
leading FMCG companies over discriminatory
pricing to emerging alternate channels like e-
commerce and organised B2B. An ugly
confrontation was avoided, as the FMCG
companies allayed the distributors’ concerns.

A similar situation may emerge as the

behemoth of Reliance, along with Future, will
drive sharp bargains with FMCG and grocery
rms, making general-trade distribution
business potentially unviable, with a sharp
di erence in incoming prices to the retailer
from the general-trade distributor and
JioMart.

JioMart’s biggest test in making this model a

success will lie in allaying the concerns of the
thousands of general-trade distributors and
not excessively stepping on their livelihoods.

Nervous optimism for FMCG rms

Given the episode in 2019 mentioned above,
FMCG companies will be wary of promoting
this emerging channel over their existing
general-trade channel, which contributes
nearly 80% of their sales. They are likely to use
this emerging channel to ful l pull-oriented
demand and to promote premium products to
drive a better pricing mix from the channel. In
addition, there is always an added concern in

https://economictimes.indiatimes.com/prime/consumer/why-jiomart-will-be-a-disruptor-in-indian-retail-and-its-likely-impact-across-the-value-chain/primearticl… 3/7
17/09/2020 Jiomart: Why JioMart will be a disruptor in Indian retail, and its likely impact across the value chain - The Economic Times

the minds of leading FMCG companies over

continuous discounting — inevitable with a
channel like this — leading to loss of a brand’s
premium image.

Small- and medium-sized FMCGs (annual

revenue of less than INR5,000 crore) are likely
to view this channel as a potential mode to
drive indirect distribution in under-
penetrated areas (similar to the organised B2B
channel). However, this channel is bound to
be margin-dilutive, given the intense
bargaining power of JioMart along with
Reliance and Future’s physical network . The
major risk for small- and medium-sized FMCG
players is going to be the extent of private
brands that will be driven by the JioMart-
Reliance combination.

The bottom line

Over the last two decades, there had been
similar apprehensions when modern trade,
organised B2B, and e-commerce were about to
scale up in India. Despite the massive hype
and hoopla surrounding these channels, their
combined share has hovered around 16%-19%
of the total market.

In summary, channels like JioMart and its like-

minded competitors are likely to capture
3%-5% (similar to e-commerce and organised
B2B) of the total market in the course of time.
This, in itself, will be a massive disruption for
the industry.

However, over the next three to ve years,

India is likely to be remain a kirana-
dominated market serviced by the local
general-trade distributor, with 75%-77% of the
total goods owing through it.

(The author is an MBA from IIM Bangalore

and a strategy-course holder from INSEAD. He
has been a strategy consultant for over a
decade and is also the author of three books:
Yours Sarcastically; Satan’s Angels; and the
upcoming Guide to Life and Career: A
Millennial’s Guide to Making it Big)
https://economictimes.indiatimes.com/prime/consumer/why-jiomart-will-be-a-disruptor-in-indian-retail-and-its-likely-impact-across-the-value-chain/primearticl… 4/7
17/09/2020 Jiomart: Why JioMart will be a disruptor in Indian retail, and its likely impact across the value chain - The Economic Times

The latest from ET Prime is now on Telegram.

To subscribe to our Telegram newsletter click
here.

3 COMMENTS ON THIS STORY

Sarthak Kumar 4 hours ago

they should have work on their app and customer service to stay in the competition

User 7 hours ago

the largest challenge for them is not giving comfort to the trade, but it is to give quality
service to consumers. Initial reviews have been pathetic. Hearing their Kirana initiative is
not working so delivering from their stores and warehouses.

Ayush Kumar 14 hours ago

How 3-5 % of market share is a great disruption in itself. Can you explain?

VIEW COMMENTS ADD COMMENTS

POPULAR WITH READERS

E-COMMERCE Some Biyani lenders queer TCS wants more women

Shopify is quietly fuelling pitch, invoke share pledges leaders in top deck,
India’s challenger brands. Now, before vote on Reliance Retail sensitisation on caste iss
it needs to nurture the merger also on cards
ecosystem.
8 mins read • By Arijit Barman & Rajesh 3 mins read • By Anandi
Mascarenhas Chandrashekhar
11 mins read • By Soumya Gupta &
Shabori Das

MORE STORIES ON CONSUMER

MORE FROM
CONSUMER

https://economictimes.indiatimes.com/prime/consumer/why-jiomart-will-be-a-disruptor-in-indian-retail-and-its-likely-impact-across-the-value-chain/primearticl… 5/7
17/09/2020 Jiomart: Why JioMart will be a disruptor in Indian retail, and its likely impact across the value chain - The Economic Times

E-COMMERCE

Shopify is quietly
fuelling India’s
challenger brands. Now,
it needs to nurture the
ecosystem.
11 mins read • By Soumya Gupta & Shabori Das

STRATEGY OMNICHANNEL  OMNICHANNEL 

FMCG recovery Country's
Brimming no ‘Impulse buying Too little, too is fast, but not leading jewellers
more, Beer Café, declined’: how late? Fashion- fast enough to urge
Olive, et al. need the pandemic store chains take restore pre- government to
to cut costs to has put a pause to D2C as a last- Covid level sales bring uniform
survive with 50% on consumers’ minute e ort to 4 mins read • By gold pricing
occupancy urge to splurge save business Sagar Malviya &
4 mins read • By
Ratna Bhushan
10 mins read • By 13 mins read • By 11 mins read • By Sutanuka Ghosal
Shabori Das Shabori Das & Soumya Gupta &
Debleena Majumdar Shabori Das

Search News, Stock Quotes & NAV

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z
BROWSE
COMPANIES:
1 2 3 4 5 6 7 8 9

https://economictimes.indiatimes.com/prime/consumer/why-jiomart-will-be-a-disruptor-in-indian-retail-and-its-likely-impact-across-the-value-chain/primearticl… 6/7
17/09/2020 Jiomart: Why JioMart will be a disruptor in Indian retail, and its likely impact across the value chain - The Economic Times
Trending Now Popular Categories
Yes Bank share price Latest news LIVE News Live! Markets Live !
Coronavirus LIVE updates China news Stock Screener MF Screener
World news Arbitrage funds ITR guide Candlestick Screener
What is an H-1b visa Best gilt mutual funds Sunday ET Covid Updates
How is credit score calculated Debt mutual funds
Stocks to buy Latest News
How to get loan with a low credit What are debt mutual funds
score
Aadhaar card guide Index funds
Narendra Modi

Hot On Web In Case You Missed It

Kishore Biyani Sensex today Mutual funds Sputnik V Vaccine
US elections impact on stock Elon Musk Jio cricket plans Latest news LIVE
market India China news Multi cap mutual funds
Latest news LIVE What are balanced funds Jiomart Best tax saving mutual fund
Gold rate today Global markets schemes
Best value funds to invest in 2020 Breaking news Apple share price Happiest Minds IPO Allotment
YES Bank share price SGX Nifty Status
Sensex Live IRCTC share price Personal loans interest rate HDFC balanced advantage fund
Infosys share price Rupee SBI equity hybrid fund Gold loan interest rate
Aadhaar Card How to check CIBIL score Aadhaar card
Income tax

ET Verticals More From Our Network

Auto News Retail News इकनॉ मक टाइ ઈકાેનાે મક ટાઈ Pune Mirror
Health News Telecom News Bangalore Mirror Ahmedabad Mirror ItsMyAscent
Energy News IT News Education Times Brand Capital Mumbai Mirror
Real Estate News Marketing & Advertising News Times Now Indiatimes महारा टाइम्
Technology News CFO News ಜಯ ಕ ಾ ಟಕ Go Green AdAge India
IT Security News Eisamay IGN India IamGujarat
Times of India Samayam Tamil Samayam Telugu
Miss Kyra Bombay Times Filmipop
MX Player Newspaper Times Prime
Subscription
Colombia NBT Gold Podcast Ei Samay Gold Podcast
MX ShareKaro App MX TakaTak App

Other Useful Links Services

About Us Subscribe to ET Prime Longwalks App
Book your Newspaper Subscription Create Your Own Ad
Advertise with Us Terms of Use & Grievance Redressal
Privacy policy Contact Us
RSS

Follow Us On: Download ET App: SUBSCRIBE

TO OUR
NEWSLETTER

Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service

https://economictimes.indiatimes.com/prime/consumer/why-jiomart-will-be-a-disruptor-in-indian-retail-and-its-likely-impact-across-the-value-chain/primearticl… 7/7