India’s e-commerce market is stagnating. The primary reason for this is that discounting has reduced. But, e-commerce players have also hit a wall when it comes to enabling new users to transact online. Mobile data cost, speed and availability is a big part of that equation.
Reliance Jio’s launch addresses that. A quick look at the why, how, what, and which of this hypothesis:
The total mobile subscribers in India number a little more than a billion. Even this is slowing down.
The number of 4G mobile subscribers is anaemic today. Market leader Airtel crossed about five million 4G subscribers in May 2016. It is safe to assume that 4G consumers count for less than 1% of India’s phone user base.
Even 3G is about 11-15% of the entire subscriber base. Most of the country is connected by flaky 2G connections. E-commerce can only move so much on such speeds.
Analysts believe Reliance Jio will have 100-120 million 4G subscribers by 2020.
How will Reliance do this?
Through aggressive pricing. This will set off price wars and the entire market will get competitive, which in turn will feed a virtuous circle of 4G growth.
A recent Analysys Mason report indicated that data prices in India were even higher than in developed countries.
Even among the small 3G base, average monthly data usage per individual subscriber was around 750 mb (in March 2016) and for 2G connections, it was a meagre 50 MB. That’s not even the data to download a couple of apps. This is majority of the country. (Jio trials saw a use of over 18 GB.)
More subscribers, better bandwidth and cheaper data — what will it all create?
1. Expand the market: Help create the next billion or so consumers who will join the internet economy. Open up the market for online commerce, social and communication applications. With UPI and Aadhar stacks going operational, it will only make it more smooth.
2. Seed richer consumption of data: An explosion of 4G services will impact the consumption of content through social media, messaging platforms etc. It will also enable new types of startups to offer their services in unique and interesting ways. Messengers are likely to see greater adoption of visual and other elements that are bandwidth hungry. It may even result in a new wave of content based startups that are dependent on more data usage.
Which services will benefit most?
Communication apps will explode even more. Whatsapp, Hike, etc. Social platforms will explode (and Facebook will reap the benefits).
Then, e-commerce players like Flipkart and Amazon will see their market expanding again.
But, imagine if one of the e-commerce players ties up with Jio to offer services. That may be a game changer. They could enable their presence by default to millions of consumers and also, maybe tie-up to offer data advantages and subsidies. To be sure, this will be watched closely by regulators.
In this context, Reliance’s own e-commerce could play a significant role except that I am not sure if Reliance can pull off that complicated game. My feeling is that they’d focus on tie-ups and partnerships to enable online commerce.
Graphics: Nikhil Raj/FactorDaily
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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.