About Amazon and customer-centricity nature
The Seattle based firm, Amazon, majorly focuses on e-commerce, digital streaming, cloud computing and artificial intelligence. Amazon is one of the big four technology companies, along with Apple, Google, and Microsoft. It has also been one of the most influential forces in the world, economically and culturally. Amazon, with a revenue of 280 billion US dollars, is well known for the disruption of the marketplace with its technological advancement and innovations. The company is customer-centric and continuously improves the customer experience using AI(flywheel), and machine learning, with 4.4 billion paid prime users.
The company further plans to disrupt the retail industry with AI, big data, and robotics, but along with success, there are also numerous allegations it carries for being anti-competitive and behaving monopolistic.
Amazon vs Macmillan case
In the year 2010, Amazon entered into a dispute with Macmillan publishers over the pricing of the electronics books. Amazon had reduced the prices of the electronic-books so low that authors could not make a profit, and these kindle books of the authors would cannibalize the sale of profitable hard-cover books as people would prefer to buy kindle editions which Amazon sold cheaper than hard copy. Later, Amazon even went on to de-list Macmillan, removing both electronic and physical books without any
explanations affecting the income of authors.
Challenges for suppliers with Amazon as a distribution
The more significant concern is that Amazon develops a direct relationship with the customers because they are the ones selling the products and own the customer data. They know what to produce and how much the sale would be, and later the Amazon goes on to make those products themselves at a lower cost, replacing even the big brands. Amazon’s dominance over the data limits the access of suppliers to their own customers and also restricts suppliers’ control over the price and quantity of products to be supplied to other distributors like Walmart and Costco as well.
Amazon has continuously grown to influence the e-commerce market. They are known for scanning the rival’s prices, so they get an alert when there is some product selling at a cheaper rate on the competitor’s website. If they find any such product then they make the product harder to find in their own e-commerce platform in order to penalize the merchant. As a result, merchants raise the price on the competitor’s site rather than losing sales on Amazon.
Amazon’s plan for grocery shops in India
Amazon has entered the retail industry to serve as a mediator between the local grocery stores and the customers where Amazon will provide the platform where items can be listed, and consumers will be able to find the goods in the stores around in the city. It is the best way to be quick in the delivery part, and customers need not wait for days to get daily necessities. However, Amazon’s monopolistic behavior can disrupt the entire distribution system in India and impact many retailers in the long term.
About Reliance and Jio
Reliance Jio is now the fastest growing telecom with more than 35 crore user bases. It took only a couple of years for them to eliminate all the small players from the market and was successful in racing ahead Vodafone, Idea, and Airtel. Reliance retail is another profitable business for Ambani, which he wants to aggressively expand to enter into ecommerce with the online-to-offline model. Mukesh Ambani works for monopoly in the market he comes, as we have seen in the case of refining -petrochemical and telecom businesses. In the telecom Reliance, Jio has been able to achieve the largest market share of 32.04% very soon after starting operations.
The Reliance has decided now to enter the retail with its JioMart platform in partnership with Facebook. Facebook is a big giant in the social media industry with enormous users on Facebook, Instagram, and WhatsApp. Facebook announced $5.7 billion of investment in Reliance Jio, and the news had come upon a time when other ecommerce companies were facing difficulties to ramp up with the supply. The partnership is predicted to be a game-changer for India’s Kirana store and other MSMEs. The dual combo has 388 million Jio and around 328 million Facebook users to battle against Amazon and Walmart.
Ground preparation by Reliance for e-commerce
JioMart is already working with merchants, so they will offer their products like point-of-sale (POS) technology in the merchant’s platform, which will enable them to sell online. Moreover, Reliance Retail has 100 million loyal members who will be willing to readily accept the JioMart.
Nature of Jio-Facebook deal
The mega Jio-Facebook deal is non-exclusive, where both parties will compete in the market. The collaboration is not for making a super-app in the immediate future but to roll out commerce services targeted at 60 million brick and motor stores. WhatsApp messenger here can play a significant role in the transactions between customers and the Kirana stores. It is clarified that both the company’s plans to come together only for areas they see the benefit of working together.
WhatsApp pilot test
JioMart has begun it’s testing of an “ordering system” on WhatsApp in three areas of Mumbai, where JioMart is using the business account for online grocery shopping. More than 1200 mom and pop stores took part in the testing where an order is initiated by sending a “Hi” to the provided WhatsApp number which will give the list of groceries to the consumers.
What small distributors and start-ups can expect from the megadeal?
The MSMEs sector has created around 14 million new jobs over the past four years, claimed by the Confederation of Indian Industry (CII). Currently, we have software companies and delivery service providers who are in the distribution network to facilitate retailers. The entry of JioMart in this segment has posed a threat to people in the business. There is a possibility of elimination of these mid-levels, so it becomes one master distributor for all the brands. It can lead to job losses and hamper the spirit of start-ups operating in the segment.
CCI Approval for the FB-JIO deal
Top government officials said that Facebook and Jio would control many consumer data in their platform and so the deal will be scrutinized from the data advantage point of view, which can be an unfair competitive advantage against rivals. Competition Commission of India (CCI) approves the mergers, acquisitions, and partnerships by taking care of market share involved in the transaction and the fair competitiveness in the market.
3. Alibaba Group
About Alibaba Group
Alibaba group holding limited is a Chinese MNC who are into e-commerce, retail, and digital technologies. Jack Ma, the co-founder and former executive of Alibaba Group, is the wealthiest person in China with a net worth of 42.3 billion US dollars. Alibaba is the world’s largest platform of B2B trading for small businesses.
Alibaba backed Zomato and Big basket into Groceries
Unicorn start-ups Zomato and Big basket, which are backed by Alibaba Group, has entered the grocery segment during the lockdown. This is a significant step towards product diversification and a move to keep up with the high demand at a time when most businesses are facing a slowdown. Online food ordering has taken a drastic hit in the past month, with order numbers falling by as much as 70% due to the COVID situation in the country.
Unicorn Start-up Paytm
Paytm, with Alibaba as the largest investor in the year 2018, had launched the Paytm mall, which is a connected Point of Sale (PoS) solution for retailers, which will enable them to manage their online customers as well. The PoS system takes care of inventory and orders on the cloud and also does instant customer billing and payment. Using the Paytm mall, retailers can fulfil online orders locally. However, the Paytm mall failed to take off in spite of a heavy-weight investor.
Paytm founder Vijay Shekhar Sharma is going back to basics to build an online-to-offline (O2O) model, enabling small merchants to sell online. He found the right opportunity during the COVID to bounce back with Paytm Mall, and now he plans to partner with 10,000 Kirana stores and small retailers for hyperlocal deliveries. With the partnership, they expect to serve 16,000 pin-codes soon.
Walmart is an American MNC that operates hypermarkets, department stores, and grocery stores in 27 countries under 56 different names. It holds the revenue of 514 billion US dollars and is currently the world’s largest company by revenue, as per the Fortune Global 500 list. In the year 2018, Walmart acquired e-commerce company Flipkart’s 77% stake for 16 billion US dollars.
Flipkart’s plan for retail Industry
Walmart owned- Flipkart already had plans to acquire a physical retail footprint to complement its e-commerce business. Flipkart will use Walmart India’s centers for stocking FMCG products such as groceries and packaged foods. In September last year, Flipkart had onboarded 27,000 Kirana stores across 700 tier 2 and tier 3 cities to expand its reach. They have completed the pilot test in Hyderabad with local Kirana stores and soon plans to expand across the county.
5. Confederation of All India Traders (CAIT) & Department for Promotion of Industry & Internal Trade (DPIIT)
About the CAIT & DPIIT Partnership
The small retailers’ group Confederation of All India Traders (CAIT) along with Department for Promotion of Industry & Internal Trade (DPIIT), a central government department under the ministry of commerce have proposed to set up an e-commerce platform to help the brick and mortar stores take orders online for essentials and provide last-mile deliveries. Other promoters will include Startup India, Invest India, All India Consumer Products Distributors Federation, and Avana Capital. The idea is to onboard about seven crore traders of the country on the e-commerce portal.
Purpose of the e-commerce portal
The purpose of the partnership is to solve the challenges of Indian citizens to get essential supplies in the short-term because of the disruption caused by COVID along with bringing synergy in various companies, software start-ups and distributors working in the supply chain to bring brick and motor shops online by providing them the required digital ecosystem and the other appropriate support. The efforts will be on integrating manufacturers, wholesalers, distributors, retailers of all verticals of domestic trade, and consumers.
Opportunity for start-ups
Startup India has invited applications from all the companies specialized in IT and logistics to come forward and strengthen the delivery system of the brick and motor stores in India. It is a unique opportunity for software providers and distributors to utilize their expertise and implement the plan well. In the end, it will be small companies and start-ups who will suffer the most if large corporations like Amazon, Walmart, or JioMart take over the market share based on their “deep discounting” art.