One of Mukesh Ambani best chances to take on the Future Group in offline retail and Flipkart and Amazon in online commerce lies in a simple solution being offered by Reliance Jio to help traders and kirana shop owners navigate their way through the complex goods and service tax (GST) regime.
Along with Walldorf, Germany-headquartered business software major SAP as its partner, Jio is one among nearly three dozen GST Suvidha Providers (GSP) in India. The crop includes NSDL eGovernance, Tally, Deloitte, and EY. Official market share data is not yet available but a source close to Jio claims JioGST is by far the largest GSP.
Jio through its Jio point of sale machine – essentially a mobile phone – and an application allows taxpayers to make registration, file challans, upload invoices, file returns, and maintain the ledger. According to government documents, a GSP shall provide tax payers with all the services and maintaining their individual business ledgers (sales ledger and purchase).
“Everyone who is filing GST does it online… JioGST helps in increase of digital penetration, data usage, and is a part of our connectivity business,” said the source, who is not authorised to speak to the media.
For now, it is spending a tidy but relatively small sum on free Jio connections with one year of free calling and 24GB data, and free use of JioGST solutions for a year. It also gives the device to make the GST inputs, which comes pre-loaded with the Jio GST kit. (See details from company brochures running in the visuals with this story.) NSDL eGovernance has priced its GSP offering at Rs 2,700 a year, which works out to about 30 paise per invoice.
Leading ecommerce players Amazon and Flipkart, on the other hand, are spending millions of dollars to bring on board retail buyers. Jeff Bezos, founder of Amazon has promised $5 billion of investment in India, and his biggest rival Flipkart has raised $7.3 billion. The reason is simple: India has the world’s second largest internet penetration behind China but is under-penetrated in ecommerce. According to consultancy firm BCG, ecommerce penetration in India is just 20%. China is 63% and the US is 79%.
Millions of data points
Data from millions of kirana stores and smaller businesses, Jio hopes, will become the base of its larger retail play. It already has some 2.5 million kirana stores registered with Reliance Market, the group’s cash-and-carry wholesale retail business but that’s not enough. Estimates of the number of kirana or mom-and-pop stores vary widely with an industry body putting the number at 50 million countrywide.
Reliance gets parts of the kirana store data when they purchase from the wholesaler but doesn’t have any data of what people are buying from the respective kirana store. Once the kirana store starts filing returns on JioGST, Reliance will have data of the end purchase, which it can further use to increase purchases through a host of special offers and discounts. This is in addition to insights from Reliance Retail, the group’s organised retail chain, that crossed Rs 33,000 crore in revenue in 2016-17.
“Reliance can build an online commerce business any day it wants, but who wants to burn their hands by offering large discounts,” said a second source. “Reliance believes in profitable business and it will do things differently.”
To be sure, there are provisions protecting data of GSP customers. Jio doesn’t see JioGST running afoul of them. The system will not capture data of what item a shopkeeper is selling and will have a limited view of total transactions. “Reliance will not sneak into what people are buying, but it will have data on total sales and purchases,” said a third source.
That will allow Jio to push JioMoney, the telco’s digital payments platform, and services of its yet-to-be-launched payments bank and help shopkeepers customise promotions and extend discounts to deepen the use of digital payments. Later, logistics can be offered to kirana stores. “There are many ways to help kirana store grow their business… JioGST will help us set up the first engagement,” the third source added.
Network of another kind
The company has already started experiments of bringing together kirana stores and brands in order to build a wider retail network. Once the kirana store implements JioGST, it will also get access to JioMoney that merchants can use to pay the wholesaler. If the wholesaler is Reliance Market, it can use JioMoney to pay the likes of Unilever, Procter and Gamble, Marico, among others, whose products are sold through the kirana store.
“If you don’t build the network, you can’t be successful,” said the second source. “How long can you build businesses based on cashbacks and discounts?”
For now, though, promotions and discounts find a place in Jio’s strategy. Once the kirana store owner starts using JioMoney, he can customise coupons for select customers and extend those coupons to increase sales. The discounts of the coupons would come from Jio, the kirana store or the brands, or it can be a combination, the first source confirmed.
JioGST is also being used by small garment manufacturers, who products sell on Reliance Fashion as private labels. These companies are also Reliance’s prospective target to build its merchant marketplace once that becomes a viable option.
JioGST comes with industry-specific variants since GST rates are different for different businesses — it varies from chemists to grocers. SAP and Jio worked with the Retail Association of India to make it kirana-store friendly and partnered with All India Association of Chemists and Druggists to customise it for chemists.
“In the polymers and the polyester business, too, there are a large number of small buyers (who can be prospective JioGST users),” said the first source.
JioGST might be just one part of Ambani’s retail ambitions, but it’s too early to declare it a success. It will take some time before Jio is able to build the entire supply chain from the kirana stores all the way up to the brands.
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Visuals by: Rajesh Subramanian
Disclosure: FactorDaily is owned by SourceCode Media, which counts Accel Partners, Blume Ventures and Vijay Shekhar Sharma among its investors. Accel Partners is an early investor in Flipkart. Vijay Shekhar Sharma is the founder of Paytm. None of FactorDaily’s investors have any influence on its reporting about India’s technology and startup ecosystem.