Hong Kong (CNN Business)An online grocery business backed by Asia’s richest man is expanding to hundreds of cities across India — a move widely seen as a challenge to Amazon (AMZN) and Flipkart.
JioMart, the grocery platform owned by Mukesh Ambani’s Jio Platforms, expanded services to 200 cities over the weekend. It had previously been piloting deliveries in three areas in and around Mumbai. The move comes just days after Jio — a part of Ambani’s sprawling conglomerate Reliance Industries — secured more cash to fuel the billionaire’s tech ambitions. The company has raised more than $10 billion in recent weeks, including a $5.7 billion investment from Facebook (FB) which includes a tie-up between JioMart and WhatsApp. That deal is still undergoing regulatory approval.
JioMart’s expansion also comes as millions of Indians remain under lockdown because of the coronavirus pandemic. “Never waste a crisis, they say!” Damodar Mall, chief executive of grocery retail at Reliance Retail, tweeted Saturday. Mall added that Chinese e-commerce giant Alibaba (BABA) “flourished” during the 2003 SARS pandemic, something founder and chairman Jack Ma has acknowledged. Read MoreAmazon (AMZN) and Walmart-owned (WMT) Flipkart are the two dominant e-commerce platforms in India. Both companies operate in hundreds of cities across the country, delivering goods such as smartphones, electronics and clothing.But JioMart’s launch “is a reason for worry for Amazon and Flipkart, [because they] are not very strong in grocery,” said Satish Meena, analyst with research firm Forrester. Flipkart launched online grocery deliveries in 2017, while Amazon has been delivering fresh food in India since 2016.Amazon and Flipkart have also faced difficulty delivering orders across India during the Covid-19 pandemic because of varying levels of restrictions from one city to the next, he said. Flipkart had to temporarily suspend services in March when the nationwide lockdown began, and Amazon had to to limit orders as it responded to increased demand.Flipkart and other e-commerce companies have worked to deliver essential goods “despite the various complexities and challenges of zonal restrictions, supply chain disruption and general safety of their employees and delivery [people],” a Flipkart spokesperson said in a statement.The lockdown required the company expedite expansion plans, including ramping up warehouse capacities to cover more zip codes for the grocery business, the spokesperson added.
Jio’s online grocery platform expanded services to 200 Indian cities, as large swathes of the country remains under lockdown because of Covid-19. JioMart launched late last year, with the goal of getting 30 million kiranas, small neighborhood mom and pop shops, online.Grocery is 70% of the Indian retail market, and more than 90% of the market is unorganized and driven by kirana stores, according to investment research firm Bernstein. The overall retail market is expected to double in size from $676 billion in 2018 to nearly $1.3 trillion by 2025, according to Bernstein. India’s online grocery market is small by comparison, worth around $3 billion this year, according to Forrester. But the firm said that number is growing fast, as the pandemic is quickly changing people’s shopping habits.
Bernstein and Forrester analysts say JioMart is well placed to disrupt the online grocery market because it can source supplies from Reliance’s brick-and-mortar stores. Reliance is India’s largest retail operator. If JioMart manages to get kiranas online and organized, it will also have a hyper-local supply and logistics chain that it can use to meet demand. Correction: An earlier version of this story inaccurately described when FlipKart and Amazon launched fresh groceries in India.
Source: edition.cnn.com