If you’re in the consumer goods space in India, ‘JioMart’ is by now a name that has come up multiple times in your news feeds, coffee table discussions, and probably even strategy meetings. By now, you’re probably trying to figure out what to make of the Ambani empire’s recent foray into e-commerce and B2B commerce. If India knows a thing or two about the Reliance Juggernaut, it’s their financial muscle, regulatory advantages, and their innate ability to dethrone market leaders. Add new friends from Big-tech monopolies into the mix, and what do you get?
Truth is, one can never know for sure. The JioMart model is evolving and it might still be quite early to speculate. Considering how analysts and industry experts all over the world are keeping their eyes and ears close to the market, I see very little value my thoughts could add to make up your opinion on JioMart yet. I’m however just here to just look at how the current CPG “ecosystem” could be disrupted with too much dependence on one corporation.
“Ecosystem” to a privately controlled distribution network
The current consumer goods ecosystem in emerging markets such as India is a beautiful co-existence of various players of all sizes and shapes. It looks something like this:
Consumer => Retailer => Distributor => Brand.
What makes this an ecosystem is the various small pieces that bind this complicated puzzle together. The relationship and trust between these various small pieces are what drives success to all the players in the ecosystem. No one player holds too much power, no one feels threatened. Here’s what this ecosystem could look like, in the future:
|JioMart + Whatsapp||=>||Point of Sale (POS) Machine + Credit +Auto Replenishment||=>||JioMart Warehouse||=>||Private Label + Brands|
Now without getting into too much detail, I’d let you form your own opinions on what could happen when one single corporation not only disrupts the ecosystem but becomes the power-centre.
Retailer to Brand: Aap kaun ho?
In a traditional distribution network, the brands feel the pulse of the market through the thousands of mom and pop retailers in their outlet universe. This relationship between the brand and their retailers and eventually the consumers is sacrosanct for every brand. This relationship upheld by brand sales teams and distributors is what drives loyalty across the supply chain for brands.
However, in the JioMart model, there is almost no direct communication channel between brands and their retailers. What this could mean for brands and their retailers is quite predictable.
Where’s the data, bro?
Collaboration between brands and retailer ordering platforms (such as Bizom Retailer App) provides brands with primary & secondary consumption data. This data drives almost all sales and distribution decisions taken in consumer goods brands. It is how they evaluate the performance of their product, channels, and product. It is how quarterly (even long term) strategies are devised.
However, with the JioMart model, Brands might not have access to secondary sales data. This really throws a spanner in the works for every brand that depends on prescriptive/predictive analytics models to predict demand and arrive at appropriate stock placement, offers etc.
Wait, what happens to distributors?
In the traditional distribution model, distributors play a very important role. They are micro B2B enterprises that soak up the ecosystem’s operational challenges such as warehousing, logistics, and credit in market. They reduce the cost of sales for brands.
So what happens to them in JioMart model?
JioMart as a channel not only disrupts traditional distributors, they also cater to the same retailers that the traditional distributors cater to. What’s different? Access to capital. JioMart can definitely provide attractive margins to drive the initial rush of retailers on the platform. Margins that are not feasible for traditional distributors to offer, eventually making them obsolete in this is the new scheme of things.
If there’s anything experience has taught us, it’s that too much power (and data) in the hands of one player cannot be good for the others in the ecosystem. Distributed control could now land in the hands of one large corporation who has the reputation of disrupting rival businesses, our friends in telecom could tell us more.
One could always argue that unlike telecom, consumer goods work on consumer preferences and not availability. I agree 100%. However, there’s always the risk of pricing control in the hands of one organization:
- Retailer margins could follow the suit that driver incentives did in the new-age cab companies.
- Pushing private-label brands over established FMCG brands become so much easier
- Brands could fall back in to a D-Mart model where they’re forced to work with a single player, despite bleeding.