With Mukesh Ambani-led Reliance Industries setting its eyes on the e-commerce retail sector after its blitzkrieg attack on telecom through the launch of Jio, analysts say the largely unorganised retail sector in India is set for large scale digitisation.
One of the biggest hurdles to digitising India’s millions of kirana shops is the high cost of point of sale equipment. However, Reliance is planning to offer a mobile point of sale (MPoS) machine running on the Jio network for a one-time charge of Rs 3,000. This is in stark contrast to the cost involved in MPoS machines provided by other companies. For instance, other MPoS service providers require one-time fees ranging from Rs 30,000 to as high as Rs 55,000.
According to Bank of America Merrill Lynch (BofAML), Reliance’s entry into the online retailing sector will result in over 5 million kirana shops being digitised by 2023, against just around 15,000 currently. Around 90 per cent of the country’s $700 billion retail market is unorganised and made up mostly of neighbourhood kirana stores.
The advent of e-commerce and the implementation of a largely tech-driven Goods and Services Tax (GST) infrastructure has acted as a catalyst in increasing digitisation, and Reliance’s foray is expected to accelerate this significantly. Primarily due to the drastic reduction in cost of operation for kirana store owners.
Reliance is looking to launch a sprawling online-to-offline e-commerce platform by installing Jio MPoS at kirana stores to connect neighbourhood suppliers to its high-speed 4G network that can be used by its customers to order supplies.
“We believe, with RIL’s entry, we could see an increase in merchant adaptability, as the price points will likely come down (RIL’s current one time deposit is Rs 3,000) and reach should expand. Consolidation is also a possibility; as a big player, RIL is entering an otherwise scattered market. Overall, we expect RIL to help expand the current 15,000 digitized store base to 5 million-plus stores by 2023,” BofAML said.