Why should the Reliance Jio Facebook combine prod Flipkart and Amazon Awake

It is high time for Flipkart and Amazon to wake up

Monday, 27th April 2020

The announcement by Facebook that it would invest Rs 43547 crores in Reliance Jio, a nearly 10% stake, is sending strong signals in different directions.

The government and its IT ministry are all in a tizzy. Jio has a mammoth database of Indian users. So does Facebook with an even more colossal database of its Facebook and Whatsapp Users. Now mix the two and you can imagine Ambani and Zuckerberg have data they can play around with much to the consternation of the government.

That however is just one thing. Other telecom operators like Vodafone-Idea and Airtel are possibly blue in the face that Zuckerberg chose to go with Jio. Reliance invested about Rs. 1.8 lakh crore in Jio and it intends to sell only 10% stake for a whopping Rs 43574 crore, a tremendous profit look at it any way.

The meat of the matter, however, could be an overpoweringly strong signal it sends to Amazon and Flipkart, inarguably India’s two biggest online retailers that Reliance plans to upend with its Jiomart Plans. Zuckerberg is the cuckoo in the Indian online retail nest and it will probably tip out the Amazon and Flipkart eggs. The stated plan of Jio, so far, is to use its Jiomart and Facebook’s Whatsapp platform to empower and push India’s millions of corner kirana store to go online and supply to local customers through the platform and with the help of Whatsapp. Once Jio enters a market everyone knows just how disruptive it is with aggressive initial offers to bait the hook and once the Indian customers cannot wriggle off the hook then they start making profits. Neither Amazon nor Flipkart can afford that kind of policy on their marketplace. Add to that the fact that the Government is keeping watch on any such tactics by these “foreign” players in the Indian retail market. However, Jio, being a desi player, may perhaps get by with any sharp tactics.

Should the Facebook investment approval meet with government approval then Jio will get to keep Rs 15000 crores that it will gladly blow on its plans to concretize its Jiomart network and possibly push Flipkart and Amazon off their perches, at least in the groceries section, if not in everything else. One worrying thing for Flipkart and Amazon is their marketplace model and reliance on couriers to take care of shipments. Handling groceries is too big a mouthful to swallow.

It would be easy for Jiomart to rope in small grocery shop owners (and any other small business) into its platform since virtually everyone uses Whatsapp and fulfilment could be left to the shop owners which could possibly relieve Jio of the logistics nightmare. Should Whatsapp payment go through and get approval then we are looking at a retail market situation that is just as disruptive as Covid is. Amazon or any other online retailers simply have no comeback answer to that. Even other payment facilitators like PayTM, Google Pay and PhonePe could be left sitting in a corner.

Source: Business Standard