On April 22, Facebook invested $5.7 billion for a 9.9% stake in Jio Platforms, owned by Reliance Industries. The deal valued Jio at a pre-money valuation of $65.95 billion and makes Facebook the largest minority shareholder in the Indian telecom network. Some of the key takeaways for the deal are as follows:

  • Both firms are working toward the dream of eCommerce. Both Facebook and Reliance consider eCommerce as the next opportunity to tap and have been working toward this for some time. Facebook launched Facebook Marketplace and invested in social commerce platform Meesho. Meanwhile, Reliance is slowly building an ecosystem of its own that gives customers access to content such as music streaming app Saavn, Balaji Telefilms, and Eros, as well as payment options like JioMoney, Jio Payments Bank, and point-of-sale (PoS) terminals for small stores. Facebook needs men and women on the ground to execute the eCommerce model, and Reliance needs a platform for customers and merchants like WhatsApp. With this deal, both these needs can be fulfilled.
  • Facebook has an ambition to become bigger than WeChat. WeChat built an eCommerce platform on a messaging app, which is the inspiration for Facebook, but with this experiment in India, Facebook can aspire to repeat at a global level something that is difficult for WeChat to do outside China. The integration of messaging and payments along with the access to the infrastructure of Reliance on the ground gives a working model to Facebook to replicate this in other markets. But we still do not know the details of how this will happen. Is it going to be built on WhatsApp, or is there going to be a different app integrated with WhatsApp Messenger and WhatsApp Pay? Without these details, the actual future of this ambition is difficult to predict.
  • “Mom and pop” store concerns still remain. After the issues faced by other platforms such as OYO and Uber, which promised high earnings to partners, mom-and-pop store owners will ask more questions over a long-term business case for themselves instead of a short-term gain. JioMart will have to not only answer these questions but also compete with similar offerings from Amazon and Walmart-owned Flipkart, which are also targeting the same audience.
  • Customer experience remains a key challenge. One of the key challenges for Reliance will be customer experience (CX). Forrester’s Customer Experience Index (CX Index™) showed that multichannel retailers had the lowest industry average score in India in 2019. To compete with Amazon and Flipkart, Reliance JioMart will have to significantly invest in customer experience. The positioning of Jio Platforms and its fulfillment will play a critical role in the fight against Amazon and Flipkart. Customer experience will also depend on what the customer-facing app looks like.
  • Online grocery consolidation continues. With the entry of Reliance, online grocery will become more competitive in the post-COVID-19 world, where consumer behavior will shift to the online realm. Amazon and Flipkart are struggling to fulfill grocery orders during the ongoing lockdown and will have to reevaluate their business models and logistics once the lockdown is over. Micro delivery companies are looking for consolidation, and at some point in time, Grofers and BigBasket, two pure-play online grocery companies, will also be targets of acquisition either by Reliance, Amazon, or Flipkart. Food delivery companies Swiggy and Zomato will also look into online grocery aggressively, as food delivery business will take a long time to reach pre-COVID-19 scale, and will also look for acquisitions in the coming months.

For more on Indian online retail, please read our report, “The State Of The Online Retail Market In India In 2019.”