WhatsApp-JioMart tie-up has power to disrupt market shares of existing platforms | The Financial Express

WhatsApp-JioMart tie-up has power to disrupt market shares of existing platforms

At present, the online grocery market is largely dominated by VC-funded apps such as Swiggy’s Instamart, Zepto, Blinkit, Dunzo, and Tata-owned Bigbasket.

WhatsApp-JioMart tie-up has power to disrupt market shares of existing platforms
Management consultancy firm McKinsey & Company recently said in a report that online grocery retail in India has seen a cumulative annual growth rate (CAGR) of over 50%, estimated to be $2-3 billion in 2020, and projected to grow to $10-12 billion by 2025.

Reliance Retail’s partnership with messaging platform WhatsApp to sell JioMart’s inventory using a fully integrated shopping interface could be a game changer for the Mukesh Ambani-led retail conglomerate, said experts studying the online grocery delivery market.

Analysts, founders, and investors FE spoke to said JioMart’s direct catalogue integration over WhatsApp chat would give the grocery delivery platform a competitive edge over existing grocery delivery apps such as BigBasket, Instamart, Zepto and Dunzo.

“JioMart is currently handling around 2.5 lakh orders per day across more than 90 cities on its existing platform, which already makes it one of the top three e-grocery players in the country. However, this partnership could turn out to be crucial for Meta (which owns WhatsApp) since they are yet to convert the messaging app into a monetisable product at least in India,” said a founder of a large online grocery delivery platform, requesting anonymity.

However, despite WhatsApp handling more than 450 million users in the country, it still might have to spend time and resources on promoting its online grocery delivery pilot with JioMart, without which users in Tier-2 cities and towns are unlikely to notice the product.

“Most users still see WhatsApp as a messaging app. With its grocery delivery pilot, unless WhatsApp or JioMart sends out a promo campaign, it’s not going to make much of a difference. But WhatsApp can also instead add a new shopping widget within the UI in their next update, which could itself convert users to paying e-commerce customers,” said the founder quoted above.

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At present, the online grocery market is largely dominated by VC-funded apps such as Swiggy’s Instamart, Zepto, Blinkit, Dunzo, and Tata-owned Bigbasket. After a major consolidation phase during 2019-2021, the market is currently witnessing another disruptive phase with quick-commerce models dominating the fundraiser in 2022. Although q-commerce startups such as Blinkit, Zepto, Instamart and Dunzo continue to expand in metropolitan areas, it is unclear whether their pitch would see demand beyond Tier-1 geographies.

Vishwanath V, general partner of early-stage VC fund 8i Ventures, said if JioMart-WhatsApp could prove to convert even a small base of WhatsApp users, it could likely open up a new distribution channel not just for grocery apps, but for other segments such as direct-to-consumer (D2C) brands and other niche e-commerce platforms.

“The holy grail in e-commerce play right now is converting Internet users to paying customers. Because at least in India, you have around 500 million users browsing online and probably only 20 million users are actively transacting online at a reasonable frequency,” Vishwanath said in an interview.

He said WhatsApp has been trying to break into the e-commerce market with its online catalogue integration for small businesses and D2C brands, although it hasn’t picked up enough steam among users or merchants. “So with JioMart integration, I think they (WhatsApp) will end up having a new look into how Indian customers behave while purchasing online, which will crucial for future expansion,” he said.

Management consultancy firm McKinsey & Company recently said in a report that online grocery retail in India has seen a cumulative annual growth rate (CAGR) of over 50%, estimated to be $2-3 billion in 2020, and projected to grow to $10-12 billion by 2025. The top six or seven metros are expected to make up 60% of the market, with mid-to-high affluent households making up the bulk of the customer base, the consultancy firm said. However, the next set of demand growth for online grocery is expected to come from smaller tier towns as demand from urban centres has hit some levels of saturation.

A large majority of JioMart’s reach is in fact in Tier-2 cities and below, which could likely be tapped using the WhatsApp user base. Currently, JioMart sources inventory from a network of its own retail stores and uses tie-ups with kiranas. But executing hyperlocal delivery is still a difficult business and only time will tell if the bets pay off.

However, the online grocery delivery integration on WhatsApp seems to be using an exclusive partnership with JioMart, and if the pilot succeeds, the messaging platform might look to expand beyond just grocery, analysts and experts said.

“Jio already has investment from Meta and a mutual agreement for selling groceries online. But the existing apps such as BigBasket, Zepto, Instamart and others still don’t have this opportunity yet, mostly because Reliance is a larger retail company compared to the rest of the competition. It is still unclear if they (WhatsApp) would open up its current seamless integration for existing e-commerce or grocery delivery startups,” added the founder of the grocery delivery start-up quoted earlier.

Vishwanath of 8i Ventures further said that although there could be an exclusivity period for JioMart and WhatsApp for the current grocery delivery feature, Meta would definitely not miss out on the larger e-commerce opportunity that the country has to provide.

“An online merchant liek a D2C brand or a small business today has to pay existing e-commerce platforms such as Amazon or Flipkart for retargeting and for ads, and brands end up parting away with some margins for working with online marketplaces. With WhatsApp, the deal could be very different since the user reach is direct, and online merchants could part away with fewer margins vehicle selling on the messaging app,” added Vishwanath.

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