Days after Facebook acquired a stake worth USD 5.7 billion in Reliance Jio Platforms Ltd – a subsidiary of Reliance Industries Ltd (RIL) that houses digital platforms like Jio Saavn and Radisys besides telecom operator Jio -- Reliance hit the ground running with home delivery of essentials like groceries and other sundries through Facebook’s WhatsApp in partnership with family-owned stores or 'kiranas' in Navi Mumbai, Thane and Kalyan in
Maharashtra. This partnership will soon scale up and leverage platforms like Instagram and Facebook to push Reliance Brands, Reliance Trends and Reliance Digital.

This landmark deal between the US social media giant and India’s largest conglomerate is bound to disrupt the world of retail. Facebook has 700 million-plus active users of its platforms in the country. Jio has 338 million subscribers. Synergy between the two partners will transform telecom operator Jio into a one-stop-shop offering multiple offerings for its customers in e-commerce, content and digital payments. According to RIL’s Chairman and MD, Mukesh Ambani, this deal will “empower nearly 30 million Indian kirana stores to digitally transact with every customer in their neighbourhood.”

Facebook has now acquired an influential partner who can help navigate the business environment in India. It has faced hurdles in rolling out WhatsApp’s payment service, which can now be possibly overcome with the political clout of Ambani. The US giant also needs to expand in newer markets beyond the US and Canada. Now that China is no more integral to its plans, what better place is there in the world for its expansion
plans than India? With this deal, Facebook gains entry into the tech space where it can take on Amazon, Flipkart and Google in e-commerce and digital payments.

Reliance, for its part, benefits from retiring some of its debt. Ambani has set a target of becoming a zero net-debt company by March-end 2021, an objective that is challenging in today’s environment where economic activity has ground to a halt. Facebook’s investment has taken place just when this zero-debt plan has suffered setbacks. For starters, there are delays in the USD 15 billion Saudi Aramco stake in Reliance’s oil to chemicals business going through due to the collapse in the oil market globally. So far, the regulatory approvals for Jio’s agreement with Brookfield to sell its mobile network towers have also not come through, according to The Wire.

The competition led by Amazon and Flipkart (owned by Walmart) is also not too far behind in tapping kiranas for efficient last-mile delivery. Amazon has so far committed USD 6.5 billion to intensify its market dominance. Of this, USD 1 billion is to digitize 10 million traders, micro, small and medium enterprises. Flipkart has struck partnerships with 37,000-odd kiranas, of whom 12,000 act as “authorised buy-zones” and 25,000 assist in delivery to homes. Its partnerships extend to resellers and general trade shops that include bakeries, pharmacies, mobile recharge and electronic stores.

While e-commerce giants assiduously woo kiranas, these local shopkeepers are also exercising options of their own. The Confederation of All India Traders (CAIT) with the Department for Promotion of Industry and Internal Trade is planning to launch a national e-commerce marketplace to help kiranas take orders online and ensure last-mile contactless delivery of essentials. This initiative will especially help in tier-2 and tier-3 towns of the country that have a population of 50,000 to 99,999 and 20,000 to 49,999 respectively where there are serious issues of connectivity and supply chain.

The future of India’s retail thus is increasingly digital. Post COVID-19, consumers especially in urban India are bound to change their behaviour, avoiding crowded bazaars and malls and preferring to shop online. Kiranas -- there are 12 million small and medium retailers employing 40 million people, mostly in the unorganised sector – clearly are an important part of the landscape that is being disrupted. However, in terms of numbers the
share of online commerce is still relatively small. But it is expected to grow exponentially to a USD 200 billion opportunity in 2028 from current levels of USD 30 billion.

Of the three major e-commerce rivals, Reliance that is already leveraging Facebook’s WhatsApp has the edge as it is not subject to the regulatory restrictions imposed on the likes of Walmart and Amazon. In February 2019, FDI policy guidelines were suddenly changed midway and rules tightened up to ensure business to business and not business to consumer e-commerce, upsetting their business model. Not so long ago, India's Commerce Minister Piyush Goyal bluntly stated that Amazon was “not doing any great favour to India” by investing here. He was, of course, mindful of the small trader support base of his party, which fears that Walmart and Amazon threaten their livelihoods. With the regulatory playing field being not so level, there are no prizes for guessing who will be ahead.

(The writer is an economics and business commentator based in New Delhi. The views expressed are personal. He can be contacted at nchandramohan@rediffmail.com)