{"id":1974,"date":"2020-05-11T12:34:52","date_gmt":"2020-05-11T12:34:52","guid":{"rendered":"https:\/\/www.tantraanalyst.com\/insights\/?p=1974"},"modified":"2023-01-10T10:07:55","modified_gmt":"2023-01-10T10:07:55","slug":"facebooks-reliance-jio-investments-gives-it-the-front-seat-to-indian-digital-transformation","status":"publish","type":"post","link":"https:\/\/www.tantraanalyst.com\/ta\/facebooks-reliance-jio-investments-gives-it-the-front-seat-to-indian-digital-transformation\/","title":{"rendered":"Facebook\u2019s Reliance Jio investments gives it the front seat to Indian digital transformation"},"content":{"rendered":"
\"Reliance<\/a>
RCR Wireless News, May 11, 2020<\/span><\/figcaption><\/figure>\n
Facebook\u2019s recent investment of $5.7 billion in Reliance Jio Platforms<\/a><\/span> has received much media attention. Soon after, private equity firms Vista Equity Partners<\/a><\/span>, and Silver Lake<\/a><\/span> announced $1.5 billion and $747 million investments into the venture. Facebook and Reliance Jio have indicated that their objective is to help the digital transformation, especially in Indian e-commerce and retail sectors. In this article, I take a closer look at why these sectors are ripe for this endeavor, how this partnership can disrupt the industry, as well as what vehicles and go-to-market options they have. Also, I will clarify how this investment is different than the previous ones in Indian telecom that went sour. <\/span><\/h6>\n
India is Facebook\u2019s largest market based on subscribers. More than its namesake app, its messaging app\u2014WhatsApp, with more than 400 million users\u2014has become a staple for Indians. On the other hand, Reliance Jio Platforms is a digital and telecom arm of Reliance Industries<\/a><\/span>, one of India\u2019s largest industrial conglomerates. Its low-cost 4G LTE service single-handedly drove the voice-centric Indian telecom market to data while crushing its long-standing competitors. WhatsApp and Reliance 4G grew together feeding on each other. This partnership will formalize that relationship and take it to the next level. For Facebook to participate in e-commerce and retail business in India, there is no better partner than Reliance and its chairman, Mr. Mukesh Ambani. <\/span><\/h6>\n
WhatsApp is the bloodline that connects Indians<\/b><\/span><\/h6>\n
To really understand what is happening in India, you do not go to news outlets or TV, but to tons of WhatsApp groups. Many believe the information they get on them more than newspapers or TV. Being an Indian native, I am on tens of groups spanning friends, family, ex-colleagues, classmates, and more. I am amazed how quick and accurate the information that I get from them is. So much so that recently even the Indian government created its own WhatsApp chatbot<\/a><\/span> to spread awareness about COVID-19. The government is also looking to reign in<\/a><\/span> on WhatsApp discussions.<\/span><\/h6>\n
Landscape of Indian retail market<\/b><\/span><\/h6>\n
The retail market in India is highly fragmented and unorganized. Some estimates it to be more than $1 trillion<\/a><\/span>. It is mostly served by millions of small shops and almost all are owned by individuals or families, many are multigenerational. Most of these are also single category stores, dealing with groceries, clothing, houseware, furniture, medical supplies, etc. In many cases, customers and shop owners know each other. <\/span><\/h6>\n
In the last decade or so, western-style shopping malls have spread, especially in urban centers. Online shopping options started appearing in the last few years, with some local players. Amazon officially launched<\/a><\/span> its Indian operations in 2013, and Walmart jumped in by taking a major stake (77%) in a homegrown player Flipcart in 2019<\/a><\/span>. Reliance also has a significant retail presence. Its retail unit<\/a><\/span> has more than 10,000 stores, in more than 6,000 cities and reported more than $17 Billion revenues last year. <\/span><\/h6>\n
The Indian e-commerce market is still very nascent<\/a><\/span>. It was $38.5 Billion as of 2017<\/a><\/span>, and is expected to be $200 Billion by 2026. Currently, it only attracts highly educated, young, and mid-to-higher income households. Outside this crowd, online buying, without personal interaction and touchy-feely experience is almost non-existent. Hence the local mom and pop shops rule. But with the presence of Amazon, Walmart, and now Facebook joining, the stage is set for e-commerce \u201cBattle Royale.\u201d <\/span><\/h6>\n
 Indians already use WhatsApp for business<\/b><\/span><\/h6>\n
The best way to understand WhatsApp based business in India is to look at how it works today for small grocery shops (called Kirana stores), without direct support from Facebook or Reliance. Much of it is based on a well-known Indian virtue called \u201cJugad,\u201d which loosely translates \u201cdo more with less.\u201d <\/span><\/h6>\n
Unlike western countries, Indians are accustomed to personalized attention and the service these small shops provide them. For example, when something is needed, they send a message to their nearest shop owner over WhatsApp. The goods are delivered to home within hours. Money is paid in cash during delivery or through Paytm (local payment processor) or Google Pay. Consumers get fast service, and many times the shop owner knows their brand and other preferences. For shop owners, this provides higher customer satisfaction, service stickiness, and guaranteed business. <\/span><\/h6>\n
To formalize such interaction and further enhance it, Facebook launched its WhatsApp Business<\/a><\/span> app in 2018. The app allows businesses to create their own profile, enables group interactions, targeted advertising, etc., above all it provides a legitimate online presence for shops and security for the interactions. However, it lacks one basic yet important feature\u2014payment, which Facebook is still trying to enable. The partnership with Reliance could help this and other challenges and significantly scale the business. <\/span><\/h6>\n
Reliance & Facebook can supercharge WhatsApp commerce<\/b><\/span><\/h6>\n
The biggest promise of this partnership is to offer a powerful platform that will enable these millions of shops to quickly transform to e-commerce, while using the familiarity of WhatsApp and the vast backend, geographical presence, and brand recognition of Reliance. The platform could be a one-stop-shop for all things retail in India, similar to the Chinese WeChat platform. Since almost half a billion people are already familiar with the app, moving to e-commerce will be relatively frictionless, while keeping personal touch and hyper-localization intact. <\/span><\/h6>\n
Sky\u2019s the limit for how far and deep the companies could take this partnership. This could be a simple integration between WhatsApp as a customer interaction tool and Reliance\u2019s payment processing, business logistics, 4G LTE high-speed data network, etc. But it could also be much deeper and wider, where Facebook brings Facebook app and Instagram to the mix, and Reliance utilizes its unrivaled franchise presence in almost every town in the country through their retail, cellular and other businesses, provide and manage the full supply chain for retail shops and more. <\/span><\/h6>\n
What is at play will be this novel and disruptive e-commerce model of digitizing existing players competing with the traditional growth model employed by Amazon and Walmart. Since the model can be easily and more cost-effectively scaled, the partnership can build a business that is much bigger in size, lesser in risk, and more amenable to the Indian business environment than Amazon and Walmart. <\/span><\/h6>\n
Anybody doubting such execution should take a history lesson on the growth of Reliance Jio, and specifically, how quickly, and methodically it built the 4G network and outsmarted its entrenched competitors. The investment of Vista Equity Partners and Silver Lake clearly shows that they believe in the opportunity as well.  It is very telling that Amazon announced its program to sell items from neighborhood stores<\/a><\/span>, right after Facebook\u2019s announcement.<\/span><\/h6>\n
What is there in the deal for Facebook and Reliance?<\/b><\/span><\/h6>\n
Both Facebook and Reliance have much to benefit from this collaboration. With commerce happening on their platforms, Facebook will finally have the opportunity to monetize its vast customer base. It will get access to unprecedented, almost real-time, hyper-local, and highly accurate purchase behavior and user data, which will be a goldmine for its mainline advertisement business. It will also benefit from Reliance\u2019s knowledge of the local business environment, decades-long expertise of navigating the tricky, local, regional, and national bureaucratic processes and political realities. Benefits to Reliance are very evident as well\u2014opportunity to substantially expand the retail business, compete effectively against the global behemoths in the burgeoning e-commerce market, monetize today\u2019s 4G and future 5G network and more. Above all, it gets to be the torchbearer for Indian digital transformation, which will help them in many ways. Of course, the $5.7 Billion investment will be crucial in executing the platform strategy, and in building the 5G network.<\/span><\/h6>\n
Other considerations <\/b><\/span><\/h6>\n
Two major objectives of the Indian government might provide tailwinds for the venture. First, push toward digitizing the country\u2019s economy. Bringing small retailers into the digital economy with minimal friction will be a welcome step from the government\u2019s perspective. Second, move toward a cashless society. Most of the transactions in the smaller shops now are cash-based, so, moving them to e-commerce will enable cashless payment.<\/span><\/h6>\n
There are a few headwinds to the deal as well. The biggest one is coming up with a common strategy and executing on it. Both are big companies with different cultures and bold ambitions. So, such a major undertaking is easier said than done. The partnership might be ideal for today\u2019s market conditions, but soon Facebook may want to expand beyond Reliance Jio\u2019s network to other cellular operators, or partner with other entities for other markets, which Reliance may not like.  <\/span><\/h6>\n
Privacy, by far the biggest concern. Neither of the companies has a stellar record on that front. Together they will have data from millions of businesses and more than 400 million users. People will be uneasy, about how the companies store, share, and monetize that data. This might also bring more regulatory scrutiny and oversight.<\/span><\/h6>\n
In closing<\/b><\/span><\/h6>\n
For uninformed eyes, Facebook\u2019s investment in Reliance might look like any other investment in an emerging economy. After all, $5.7 billion is chump change for Facebook. However, when looked at more closely, this investment can give a huge role for Facebook in the digital transformation of India, especially in e-commerce. Facebook with its extremely high WhatsApp penetration, and Reliance with its vast empire of businesses and a large and growing cellular network, together have the potential to bring a novel and disruptive model to rival traditional, global e-commerce players such as Amazon and Walmart. By their own admission and market landscape, grocery and retail businesses seem to be their initial targets. While the business environment and market trends are favorable, a lot depends on how they execute. It will be interesting to see how this saga unfolds. <\/span><\/h6>\n
For an up-to-date analysis of the latest telecom and mobile industry news, please sign-up for our monthly newsletter at TantraAnalyst.com\/Newsletter<\/a><\/span><\/span><\/h6>\n","protected":false},"excerpt":{"rendered":"

Facebook\u2019s recent investment of $5.7 billion in Reliance Jio Platforms has received much media attention. Soon after, private equity firms Vista Equity Partners, and Silver Lake announced $1.5 billion and $747 million investments into the venture. Facebook and Reliance Jio have indicated that their objective is to help the digital transformation, especially in Indian e-commerce and retail sectors. In this […]<\/p>\n","protected":false},"author":2,"featured_media":1975,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"image","meta":{"mc4wp_mailchimp_campaign":[],"footnotes":""},"categories":[58],"tags":[],"class_list":["post-1974","post","type-post","status-publish","format-image","has-post-thumbnail","hentry","category-ai-compute-iot","post_format-post-format-image"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.tantraanalyst.com\/ta\/wp-json\/wp\/v2\/posts\/1974","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.tantraanalyst.com\/ta\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.tantraanalyst.com\/ta\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.tantraanalyst.com\/ta\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.tantraanalyst.com\/ta\/wp-json\/wp\/v2\/comments?post=1974"}],"version-history":[{"count":0,"href":"https:\/\/www.tantraanalyst.com\/ta\/wp-json\/wp\/v2\/posts\/1974\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.tantraanalyst.com\/ta\/wp-json\/wp\/v2\/media\/1975"}],"wp:attachment":[{"href":"https:\/\/www.tantraanalyst.com\/ta\/wp-json\/wp\/v2\/media?parent=1974"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.tantraanalyst.com\/ta\/wp-json\/wp\/v2\/categories?post=1974"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.tantraanalyst.com\/ta\/wp-json\/wp\/v2\/tags?post=1974"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}