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Jiomart: Reliance-Facebook Deal To Have Long Term Benefits For Both: Here's Why

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Reliance Industries Limited's (RIL) deal with Facebook was put to action shortly after its announcement. On 22 April, RIL in a stock exchange filing announced that Jio Platforms Limited and Facebook Inc have signed a binding agreement for the American social media giant to acquire 9.9 percent stake in Jio.

As part of the deal, JioMart (a part of Reliance Retail) was to use Facebook's WhatsApp platform to expand the venture's goal to help Kirana shops reach more customers.

Reliance-Facebook Deal To Have Long Term Benefits For Both: Here's Why
 

"Our focus will be India's 60 million micro, small and medium businesses, 120 million farmers, 30 million small merchants and millions of small and medium enterprises in the informal sector, in addition to empowering people seeking various digital services," the company said during the announcement.

Less than a week after the announcement, on 27 April, JioMart went live on WhatsApp in areas of Navi Mumbai, Thane and Kalyan on a pilot basis. It would soon be expanded to other regions of the country.

On the same day, financial services company Credit Suisse in its report said that the deal is set to bring long term benefits for Facebook as well as RIL which could evolve beyond grocery shopping over WhatsApp.

  • Facebook has been looking to expand its revenue source beyond advertisements. It had earlier purchased stakes in two other Indian digital platforms, - Meesho, a social commerce company and Unacademy, an online education startup. It also has its own commerce platforms like Facebook Marketplace, Instagram Checkout and WhatsApp Business accounts.
  • "Incrementally, the focus is to complete the commerce transaction on Facebook platform, and therefore it is possible that at a certain stage JioMart may be available as a mini-app (similar to WeChat)," the Credit Suisse report said.
  • An Economic Times report citing sources had said that the two companies are looking at establishing a super app which would combine digital payments, social media and more features like hotel/flight bookings. This will allow RIL access to users' search and spending habits using Facebook's technology that it uses for advertisements.
  • The app will also provide B2C (business-to-consumer) engagement to Reliance Retail allowing it to sell its own private labels like Best Farm, Masti Oye, etc through Kirana shops.
  • The existing large userbase of WhatsApp in India is a major push for the JioMart facility as it will create a customer base by the time its standalone app is launched.
  • Facebook will also be able to drive its advertising engine, which represents 98.5 percent of the company's revenue.
  • "The key benefit of deal is faster adoption of the New Commerce initiative on grocery. However, key bottleneck currently is to get a significant number of kirana partners on board (as delivery can then be really low cost)," the Credit Suisse report said.
Story first published: Wednesday, April 29, 2020, 16:06 [IST]
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