Reliance JioMart Will Capture 50% Of India’s Online Grocery Market; Facebook Is The Reason?

Goldman Sachs stated that Reliance Industries would capture half of the online grocery sales in India through its Facebook-Jio deal. 

The American financial services firm also said that as a result India’s e-commerce business is likely to rise at a compound annual growth rate (CAGR) of 27% and will reach $99 billion by 2024.

Read on to find out more…

COVID-19 Pandemic, Lockdown Have Accelerated E-Commerce Growth!

Goldman Sachs said the COVID-19 pandemic is the key driver for the acceleration in the adoption of numerous technologies and consumer behaviours, mainly e-commerce.

It said, “What started at first with panic buying, hoarding and nest feathering out of necessity has turned into an array of adaptations that have driven e-commerce penetration from 16 per cent of retail spending in the US in 1Q19 to over 40 per cent in May driven by year- over-year growth of nearly 70 per cent.”

The report ‘Global Internet: e-commerce’s steepening curve’ formulated by Goldman Sachs said the COVID-19 pandemic and the resultant lockdowns has been a driving force for the penetration of e-commerce globally with categories such as consumer packaged goods driving as much as 3 years of penetration growth in 3 months.

It said, “We forecast India e-commerce will reach USD 99 billion by 2024, growing at a 27 per cent CAGR over 2019-24, with grocery and fashion/apparel likely to be the key drivers of incremental growth in our view.”

As per the study, the e-commerce penetration in the country is expected to reach 10.7% by 2024 compared to 4.7% in 2019.

The firm said that the penetration into grocery or Fast-moving consumer goods (FMCG) will be the contributing factors for growth in India’s e-commerce. It is also expected to improve the payment ecosystem and ease of shopping through WhatsApp among others.

 Goldman Sachs said adding the last 500 basis points of the increase took 4 years, “We expect non-grocery e-commerce penetration to see a sharp increase of 500 basis points over the next two years to reach 16.1 per cent by 2021.”

As of 2019, the online extent in India for consumer electronics was high at 40%. Though there has been significant growth in online penetration in other categories like apparel, appliances, health and personal care, India is far behind from its peers like China.

It said, “As far as incremental growth in e-commerce is concerned, we expect grocery to be the biggest driver with 40 per cent contribution to incremental e-commerce GMV (gross merchandise volume) between 2019 and 2024.”

“However, online penetration currently stands at less than 0.5 per cent (absolute size USD 2 billion), one of the least among categories,” it said. 

While giving a silver lining the report also stated that the online grocery market in India to grow by 20 times over the next 5 years, to reach USD 29 billion in value (5.1 %penetration) by 2024. 

The firm said that it is forecasting online grocery orders to grow from 300,000 per day in 2019, to more than 5 million per day by 2024.

On a global scale, e-commerce would grow 24%, the firm forecasts. 

Facebook-Jio Deal A Key Driver For the Growth In Online Shopping In India?

Amidst the coronavirus outbreak, Facebook, world’s biggest social network bought 9.99% stake in Reliance Jio, the telecom wing of Reliance Industries Limited (RIL). RIL’s e-commerce venture, JioMart plans to use Facebook’s WhatsApp to connect local grocery stores with the consumers.

The report also said, “The biggest near term theme in India internet, in our view, is the foray of Reliance Industries (India’s largest market-cap company with presence across sectors such as energy, telecom, and retail) into e-commerce, and the company’s tie-up with WhatsApp for online grocery.”

Online grocery has been escalating at over 50% year-on-year (Y-O-Y) for the last couple of years. 

The report stated with the COVID-19 lockdown coupled with JioMart, more customers have shifted to online grocery shopping and the growth is expected to accelerate to 81% CAGR during 2019-24.

RIL’s foray into the e-commerce space via JioMart by using its large of?ine distribution capabilities and also with the Facebook-Jio deal, ability to order groceries through WhatsApp – a platform with more than 400 million users in India.

Goldman Sachs said, “We believe RIL’s partnership with Facebook could result in the company becoming a market leader in the online grocery space, with more than 50 per cent share by 2024.” It added, “Having said that, we do see grocery as a large category for two or more players to co-exist over time.”