JioMart Most Preferred By Retailers But Udaan Catching Up Fast: Kotak's Mumbai Survey
In Mumbai, JioMart has first-mover advantage, but Udaan seems to be catching up fast, capturing 14% market share in 13 months.
JioMart, the e-commerce venture of Reliance Industries Ltd., has captured 16% market share in Mumbai—as it pushes existing private brands to kirana stores—even as Udaan emerges as a challenger, according to a Kotak Institutional Equities survey.
The billionaire Mukesh Ambani-owned venture, which was rolled out to revolutionise the country’s retail distribution, contributed 13.6% of overall orders received by kiranas. "This share is higher than any of the previous survey findings," Kotak Institutional Equities said in its report.
While JioMart—launched in Mumbai two years ago—has first-mover advantage, Udaan seems to be catching up fast. The rival retail business-to-business start-up has been able to capture 14% share after being in partnership with retailers for only 13 months, indicating high competitive intensity, the brokerage said.
The findings are based on the second round of a survey conducted by the brokerage in Mumbai. The survey included 277 mom-and-pop stores, selling items ranging from groceries to personal care. Of these, 141 retailers were using JioMart, while 115 were using Udaan and the rest didn't partner with anyone.
JioMart's current market share, however, is lower than the 25% share it had earlier cornered in Mumbai, as highlighted in the December 2020 survey.
It is also lower than the 26%, 19% and 20% share cornered by JioMart in Gurugram, Ahmedabad and Bengaluru, respectively.
Around 21% of the retailers surveyed stock JioMart's private brands such as Good Life, Snac Tac noodles and Yeah! Colas, etc., as compared with 12% private labels of Udaan, Amazon, and Metro Cash & Carry.
Why JioMart Is Preferred By Retailers
The survey highlighted that mom-and-pop stores, that account for four-fifths of a near-$900 billion retail market, are turning to JioMart to stock up on brands because "JioMart has improved its service levels extensively matching traditional distributors and become aggressive in the B2B distribution space".
About 82% of the respondents mentioned that JioMart representatives visit weekly. The servicing share was heavily skewed towards "does not visit" by JioMart sales representatives in the December 2020 survey.
However, key pain points of kiranas revolved around lower margins, lower discounts, and late delivery.
"About 65% of retailers use both JioMart’s app and call executive for placing orders. Similar kind of issues has been raised in the past survey," said Kotak.
JioMart offers a profit margin of 7-15% depending on products, while Udaan's margins range from 8-14%.
Retailers typically deal with multiple distributors. A majority of the retailers engaged with more than 10 distributors.
Nearly 37% of JioMart partner retailers dealt with 15 plus distributors and 55% dealt with 10-15 distributors.
"One-stop source of product range" was another parameter while deciding on engaging with JioMart as a distributor for 73% of the respondents, the survey showed.
JioMart has also started a ‘Jio Smart Kirana Program’ wherein it ensures 3% additional profit margins on all products ordered from JioMart (app or web), free signboard for the store with JioMart-powered signage, doorstep delivery and preference in ordering and delivery of products as well as free inventory management software.
Currently, JioMart has 2 million partner stores, as per RIL’s AGM disclosures, and it targets to onboard 10 million partner stores over the next five years.
Earlier surveys conducted in Mumbai (December 2020) and Bengaluru (February 2021) had shown some skepticism among retailers on JioMart's business-to-consumer strategy.
But the sentiment seems to be improving as the company fine tunes its business model, the study said. Retailers in Mumbai felt "positive" about JioMart’s B2C business intentions and its attempt to bring retailers under its coverage.
JioMart engages with small retailers in two ways: acting as a distributor by supplying products to retailers, and utilising the small store network to fulfill its orders for JioMart’s B2C portal.
The B2B and B2C services offered by JioMart are bundled. In order to receive B2C orders from JioMart’s portal, a retailer also needs to have a B2B partnership with JioMart.
JioMart’s annualised revenues earned per retailer is estimated to be in the range of Rs 7 lakh for Mumbai-MMR.
JioMart’s intent to launch its distribution service on a large scale can help it amass sizeable revenues, according to Kotak. Currently, JioMart’s penetration stands at 37% in Mumbai versus Udaan's 36%.
According to Kotak, the bulk of its orders on digital platforms come from tier II cities and beyond.
"While the proportion of modern trade has been on the rise, we believe Reliance Industries would want to integrate its Reliance Market offering with its network of kirana stores, thereby disintermediating the existing value chain (company–distributor–wholesaler–stockist–retailer)."
The brokerage expects the business to be "an important feeder to the digital commerce business and can significantly aid supply aggregation in a fragmented market".
Notably, the JioMart app sees about 19.2 million monthly visits. This compares with just 1.2 million for DMart, 10.3 million for BigBasket and 3.7 million for Blinkit.