Reliance’s JioMart Is Gaining in India. Should Amazon Worry?

Indian billionaire Mukesh Ambani’s e-commerce platform JioMart went live in India just over a year ago. Asia’s richest man saw an opportunity as more consumers shifted toward online shopping. Ambani’s Reliance Retail, a subsidiary of Reliance Industries Limited (NSEI:RELIANCE), was already in a solid position to make a dent in India’s e-commerce space thanks to a wide network of physical stores. This posed a challenge for Amazon (NASDAQ:AMZN) — which was making aggressive moves to corner a bigger share of India’s online shopping industry.

JioMart didn’t take long to scale up its operations, establishing a presence across 200 Indian cities. Ambani recently revealed just how far his e-commerce venture has come in a year, and the stats should start giving Amazon sleepless nights. Here’s why.

Lady shopping on a tablet with her card.

Image source: Getty Images

JioMart has made outstanding progress

At Reliance’s recently held annual general meeting, Ambani pointed out that JioMart has already hit 650,000 peak orders in a single day. That is a nice increase compared to the 250,000 daily orders JioMart was averaging around a year ago and 500,000 daily orders toward the end of 2020. It is also worth noting that orders from local mom-and-pop stores have jumped three times in a year, while grocery orders have doubled.

Even better, Ambani points out that 80% of JioMart’s customers place repeat orders on the e-commerce platform. This impressive growth has been driven by JioMart’s strategy of onboarding local shopkeepers onto its platform.

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JioMart has brought on 300,000 merchants and local shopkeepers across 150 cities, which is a smart move as local shopkeepers reportedly control 96% of India’s lucrative food and grocery market. JioMart is recruiting local stores as franchise partners and giving them technological tools to fulfill online orders. So, customers in a locality can simply place an order on the JioMart app and the same will be fulfilled by their friendly, neighborhood store from where they traditionally used to purchase goods physically.

JioMart is reportedly getting half of its orders from India’s smaller tier-two and tier-three cities. The Indian government classifies tier-two cities as those having a population between 50,000 to 100,000 people. Tier-three cities are much less populated with a range of 20,000 to 50,000 residents. These cities are driving a nice chunk of the country’s e-commerce growth. The e-commerce venture has also tapped the wide presence of Reliance Retail’s physical footprint to deliver electronics and fashion/apparel to 3,000 pin codes across the country.

What’s more, JioMart plans to switch into a higher gear as it adds another 10 million merchant partners in the next three years. Reliance Retail is also moving forward with its integration of JioMart with WhatsApp. JioMart intends to roll out the feature connecting merchants and customers in the coming quarters.

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So it wouldn’t be surprising to see JioMart sustain its terrific growth momentum, or even switch into a higher gear, thanks to a combination of a wider merchant base and improved reach. This could be a concern for Amazon in India, as the e-commerce giant has been trying to expand its reach in the fast-growing niches of India’s online shopping market.

Amazon has reason to worry

Amazon currently relies on local stores and the growing adoption of e-commerce in India’s tier-two and tier-three cities for growth. The smaller towns accounted for nearly two-thirds of Amazon’s orders in India in the past year, while bringing in 85% of its new customers. The company achieved this by expanding its Local Shops on Amazon.

Amazon reported in March that it had enrolled over 50,000 sellers under this program across 450 cities, a nice jump from just 5,000 stores in April last year. This falls short of JioMart in terms of sheer numbers, though it is worth noting that Amazon claims to have a presence across more cities.

Additionally, Amazon’s grocery business has gained traction thanks to its expansion into smaller cities, with non-metro areas accounting for 60% of new grocery customers. The company’s grocery category has doubled its growth in India in the past year.

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JioMart, however, could give it a run for its money in the online grocery market space, which is expected to hit $29 billion in revenue by 2025, according to Goldman Sachs. JioMart is expected to corner 50% of that market.

It is estimated that Amazon’s share of India’s e-commerce market stands at just over 31%. That could be a big deal in the long run, as the market’s size is expected to jump to $200 billion by 2026 from $38.5 billion in 2017. Business from India is expected to account for 20% of the company’s overall growth in the next five years. However, Amazon will have to step up its game if it is to maintain its momentum and market share in India in the face of new competition. 

 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.


View more information: https://www.fool.com/investing/2021/07/09/reliances-jiomart-is-gaining-in-india-should-amazo/

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