JioMart: Reliance Retail's success to change dynamics of grocery industry
New Delhi : A brokerage firm Jefferies has claimed that Reliance Retail's upcoming JioMart may alter the dynamics of grocery industry, but execution holds the key and there are challenges.
"We see the grocery opportunity as huge and own-label introduction as the next logical step. RRL's success could alter the industry dynamics structurally, but execution holds the key and there are challenges", it said in a research.
The pilot program was launched last year in different places and now it has been extended to Mumbai. JioMart will be launched by Reliance Retail in partnership with social media platform WhatsApp. "Our interactions with retailers suggest the model is still evolving", the research said.
"Execution holds the key and RRL would require significant efforts like micro-market strategy, feet on ground, customer & consumer-centric approach", the research said. "While we view the opportunity as immense, we believe RRL will take considerable time to gain scale", it said.
Currently, JioMart does not have any official application nor it is yet connected with WhatsApp, but both the options will be made available in coming months.
"Given COVID-19 related issues, we expect issues like delayed delivery or lack of delivery option to be resolved in the coming months", according to the research.
The introduction of own labels is the logical step in due course, which would be margin positive - generic product name along with own label could alter the FMCG industry dynamics.
Unlike the competition, RRL offers POS (handheld device) free of cost, with less than ₹5,000 refundable deposit, with no monthly outgo.
RRL's POS allows retailer to manage inventory, place orders on RRL, accept payment, generate tax returns; hence, it is not just another POS. However, not every retailer is using all functionalities as of now.
RRL is also building B2B presence, while an important aspect of its B2C strategy, retailer has an option to even sell in the offline segment, on his own.
Jefferies said that there is some concern about too much dependence on one vendor (RRL) in the long term, hence, most retailers expect both (RRL & traditional) to co-exist.