Will Jiomart Whatsapp Partnership create first 100 Billion dollar startup from India?
Do you know that you can buy groceries from Jiomart’s Whatsapp handle within Whatsapp App. Shocked!!
You should not be surprised by the close integration as Meta has ~10% stake in Jio. Also, both Jiomart and Whatsapp are struggling in their respective markets. Jiomart has not been able to make much dent in the Indian grocery market while Meta is struggling big time to monetise their prized asset aka Whatsapp.
So what do they do - two of the top 10 richest men in the world combine forces in the potentially biggest online grocery market of the future. In fact, this partnership is so important for Reliance that Isha Ambani showcased this user experience in the last held Reliance’s AGM.
But first thing first - Why are two of richest men in the world targeting Indian online grocery market?
Online Grocery is attractive for a number of reasons including:
1) Huge Market: Grocery is the biggest market by far in India (2/3 of Retail and ~ USD 600 Billion). With the onset of the Indian e-Commerce revolution, online groceries have been gaining prominence. Indian eGrocery market is set to reach $20-25 Bn by 2025 (from ~4-5 Bn USD in 2021) , growing at a CAGR of 50-55%.
2) Good Online penetration is possible in Grocery: So this is not a market which would forever be saddled with low online penetration. But, we can actually have very strong online penetration here. US already has a 10%+ online penetration in the Grocery market. China has a very big Online Grocery market - its size is already topping USD 200 Billion with a 20% online penetration. In fact, as per a number of reports - online Grocery would account for over 50% of the overall online commerce market in India by 2029.
3) Offline Grocery is BORING: Grocery shopping is something which cannot be compared to the joys of offline Fashion shopping. It is boring and induces a sense of boredom in the minds of most sane people like me. So, if given a choice of buying grocery online vs buying grocery in a supermarket or your neighbourhood Kirana store - Most of us would choose online (if we trust the online retailer and delivery timelines are short).
4) Strong Repeat rates: Consumers shop for Grocery at least once a week so the frequency of purchase is the highest which makes a few things possible - 1) High repeat transactions leading to higher LTV 2) Having a lot of user data leading to better personalisation and experience
So All in all, it’s a really really attractive market.
Online Grocery is not just big but has great moats as well - Similar to Indian Telecom market - Does it ring a bell - Jio Jio Jio !!
Groceries are a big chunk of any retail market but it is not easy to set up online due to the inherent challenges with the supply chain and it requires a lot of investment in back end infrastructure. These challenges are more pronounced in India as the supply chain problems have not been solved for the physical retail as well. All of us have read newspaper articles pegging that 35-40% of fruits and vegetables get wasted due to lack of proper supply chain.
There is a large upfront investment required to setup this supply chain. However, once the supply chain is setup and the consumer trust is established on quality + we are able to provide convenience through a large selection at lowest prices then there is no looking back.
Enough of the Background Story - What exactly is the user experience here and How good is it?
This is what Jiomart says on their first message within the Whatsapp interface
Now shop from JioMart directly on WhatsApp. Enjoy lowest prices, no minimum order value, free home delivery.
So basically the core value proposition for the users is that you would get lowest prices and free home delivery (for any size of the order).
In the next step - the platform offers these two options -
View Top Deals
View Categories
DEALS FOR TODAY
When I browsed the top deals, I saw 30 deals on the platform.
Ghee, Butter, Oil - 8 | Detergent and Soaps - 5 | Kitchen Items - 10 | Others - 7
Checked prices for all of these products and compared with Amazon Fresh. Some of the items were at the same price while some were at slightly lower prices.
However, there was no deal which was truly exceptional inducing a strong reaction from the users. And mind you - this would not work unless the deals are mouth-licking good
Essentially, the experience is definitely not good enough at the current stage.
This takes us to the second question - Who exactly are the potential customers for Jiomart?
There are the following three set of users in the market:
Regular Buyers: Users who are already buying regularly from other grocery apps aka - BigBasket, Amazon Fresh, Instamart, BlinkIt, Zepto etc.
Exposed to Grocery shopping but not buying - But have not turned regular due to a variety of reasons
Have never bought grocery online
So which of these user segments would JioMart get a potential Product Market Fit in
User Set 1: Frequent Buyers - The first set of users who are already buying grocery online are the most competed for and are already happy with one of the current services. Jiomart would need to do something drastic to win over these guys. Essentially - it would boil down to taking losses to subsidise quality and winning over the customer. It’s anybody’s guess if Jio would do that. However, given that it is a small number currently and a much bigger user base is ready to be tapped - means that Jio might want to focus on segment 2 and 3 to start with.
Segment 2 - Exposed to Grocery shopping but not buying - These users have been exposed to Grocery shopping - but they have not crossed the chasm. Might have bought also once/twice but they don’t see value in the proposition or don’t trust the apps for giving them a good quality product at a reasonable price.
Segment 3: Not exposed to online Grocery Shopping - This is the prime segment for Jiomart to explore through this Whatsapp integration. More so because, they would already have Whatsapp installed and Jiomart/Meta might be able to push Grocery shopping proposition.
For this set of users, who do not want a lot of apps in their mobile - it makes a lot of sense to have the whole grocery buying experience within the walled garden of Whatsapp. So, there would be a mechanism employed to make these users know about the availability of groceries online and then a strong offer would be given to them which the users would not be able to say no to. Similar to the offer that Jio launched with (Free Services for X months) and the ones that Jiomart was running when they launched
“Get Onions for Rs. 9/kg”.
Indian consumers would go to any lengths to redeem such an offer and in case, they are happy with the quality of onions and the servicing of the platform then they might, in fact, stick with the Grocery service giving them more and more share of their wallet.
Kunal Shah of Cred shared a beautiful framework to decide whether the online version of a particular service/product would work or not.
If we rate both the new experience and old experience from 1 to 10 then the difference in experience rating should be at least 4 after taking away the subsidies and all the short term subsidies.
Grocery shopping definitely comes as a sustainable service for a big population. In terms of which segment Jiomart would go after - Segment 3 is the largest and gives them the most leverage due to their integration with Whatsapp so they might want to try targeting that segment to start with.
What are the other benefits for Jiomart of being on Whatsapp from user experience angle:
What exactly can Jiomart offer to the users through its Whatsapp Integration. These are some of the few options that are available to Jio:
Community angle of shopping: In case, they introduce a community angle to shopping like PinDuoDuo then integration would have made a lot of sense. (For the uninitiated PinDuoDuo is a Chinese app which helps you get deep discount on groceries and similar essential goods by buying together with friends). PinDuoDuo gained a lot through being available on WeChat.
Better Payment experience: With Whatsapp Pay getting scaled - this can lead to strong buying experience
Better Personalisation: Can user’s Whatsapp data be used to create a more personalised user experience. Currently not being done. But can it be done in the future - Maybe.
Distribution Benefits for Jiomart through Whatsapp Integration
For Jiomart - the biggest theoretical benefit is widespread distribution. Whatsapp has 400 Mn+ Monthly Active Users in India - majority of which spend over an hour daily in the app. However, the usage is on chat which is a really personal experience and difficult to add ads in the same.
Now, the question is - how would Whatsapp push JioMart Shop within Whatsapp. Not a straightforward task - However, if cracked then - it would save the biggest cost (User acquisition and user re-engagement) which every other grocery player is facing.
If customer acquisition and customer re-engagement cost is saved and passed to the user then it would clearly create a strong sustainable advantage for Jiomart.
Whatsapp may introduce new features for the businesses and Jiomart integration might be the window to test them in India at scale before opening it up to other advertisers. This time window itself can create a systematic advantage for Jiomart.
Can Meta help Jiomart reach the ideal target customer. Meta has the customer data in terms of the users which are buying grocery online through various apps on back of the FB pixel which is installed by almost all apps. However, can they and would they want to use this data to target users for Jiomart. Can they do it - yes they can. Would they want to do it - Not sure as this has a potential of rocking their advertising machine which is trusted by all the millions of advertisers + their might be privacy issues related to sharing this data with another app.
Does Whatsapp Benefit as a Product through this Integration
Facebook has been struggling to monetise Whatsapp. In fact, as per the acquisition terms - Meta was not supposed to monetise Whatsapp at all. But now that Whatsapp Founders have left Meta in not so amicable manner. Zuck is looking to monetise Whatsapp. However, even though the platform has huge user base engaging at a daily level and spending significant amount of time within the app, Meta has not been able to come up monetization models unlike WeChat in China.
The only monetization model which is being used on Whatsapp is opening Whatsapp APIs to business wherein they can communicate with their existing user base through a pre approved template. Example: MakeMyTrip would send across the flight details on Whatsapp (in addition to other channels) once you have completed a flight booking. And in case, you abandoned midway - then you might receive a nudge to complete the transaction.
Lets see the potential of this monetization model. In India - Whatsapp has 400 Mn MAUs - Now there are two use cases for the businesses -
Post Transaction Servicing: In India, we have around 10 Million transactions a day. Say there are max 5 messages per transaction. This means that there would be 10X5X365 Mn messages a year ~20 Bn Messages. Each 1000 messages cost 7 USD so the total market size for this currently is ~150 Mn USD. One sidenote: The pricing in India is much lesser compared to other markets like Europe and Asia. On an average the pricing is 10X that of India so if we look at this monetization in other countries - It would be much higher than that in India. In fact, the pricing is really low in India and US (US is 14 USD per 1000 messages) compared to say France which is 140 USD per 1000 messages.
This monetization is a good monetization trick as the user experience is not getting deteriorated as the whole experience is being driven by user actions and the user is getting the Whatsapp messages only on transactions. However, this limits the overall monetization for Whatsapp.
We estimated the current Indian market potential to be USD 140 Mn (if all the businesses start using Whatsapp channel for their post order communication). What about the market sizing in other countries.
India is by far the biggest market in terms of users with 400 Mn users - the second largest market is Brazil with 120 Mn and then the number of users fizzle out but even then if we look at top 8 countries outside of Brazil and India - the user base is 400 Mn+. The overall user base for Whatsapp is 2 Billion which essentially is in a way representation of world’s online population. Around 70% of Facebook’s global user base lives in Developing countries so assuming the same - Whatsapp’s third world user base is 1.4 Bn and first world user base is 0.6 Bn.
Using this to estimate the overall market - Market size for developing countries would be similar to India @ 140 Mn per 400 Mn user base so developing country market size is ~0.5 Bn USD
Developed country monetization would be roughly 5-10X. Assuming 5X - The overall market size would be ~1 Bn.
So, in total the revenue from this service would be USD 1.5 Bn which is a start but thats what it is for a service of Whatsapp’s size.
Let businesses run normal ads like Facebook/Instagram
Whatsapp’s user experience is vastly different from that of Facebook (even though the Status feature is very similar to Stories Feature in Instagram and opens up an ad inventory on Whatsapp). While FB employs a feed to aggregate the updates from your network and is not really really personal because it would feature updates from your family, your friends but it would also have updates from the businesses and publications that you follow in addition to the various content creators that you follow so when Facebook started pushing ads within the feed - it worked.
Even though, it looks easy in the hindsight - at that point of time - it was not super clear that this inclusion of ads in the main product (feed) is not going to significantly deteriorate the user experience. But, here we are today - FB has an advertising revenue of USD 100 Bn. One main component which has helped Facebook scale these numbers is that FB has not just been able to get the branding dollars but is also getting significant percentage of Performance marketing budgets from SMEs and big brands alike. Which has been done on back of all the data that FB system has (think putting in updates n your age, city, gender, spouse’s name etc etc and following brands + think all the FB pixels which have been installed on almost websites on the internet). Because FB has all this data - it is able to convert well from Impression to Purchase which is even better than the conversion on Google for, at least, ecommerce in India.
Now, the question is where would Whatsapp inject the ads and how would it ensure that the user experience does not deteriorate significantly. In addition, what data does Whatsapp has which can be used by the app to match the businesses with users.
One issue with this mode of monetisation is that as we increase the number of ads - there is a significant chance of user experience deterioration which Whatsapp needs to guard against. The CTRs that we are seeing on Whatsapp currentlky are upward of 10-15% and if they can maintain this or keep it in the same of order of magnitude - it is going to be a goldmine for businesses.
Lets ballpark the market size here - Total users 2 Bn - say on an average they are doing 5 sessions a day - 10 bn sessions a day and say we are able to show 3 ads per session on an average then total 30 Bn Ad Impressions per day.
70% from developing countries - say at USD 1 per 1000 impressions and 30% from developed countries say at USD 5 per 1000 impressions.
Developing countries - 21 Mn USD per day Rev
Developed countries - 45 Mn USD per Dsy Rev
Total per day - 66 Mn Rev
Annual Advertising Revenue from advertising model for Whatsapp- 25 Bn Fucking USD
Now, this is something in the ballpark of what FB is doing. Question, here is whether this can be achieved without pushing users out of Whatsapp and deteriorating the whiole experience and unknowingly pushing the app into negative flywheel.
Everything depends on the user experience in these ads and Jiomart might give them an option
What are the other monetization options for Whatsapp
Broadly speaking - the playbook remains very similar to Facebook in terms of their monetization.
Either can help businesses market their products on Whatsapp similar to Facebook
Help businesses acquire users by integrating the businesses within Whatsapp - Similar to how WeChat did in China
Embed other apps into Whatsapp - Wechat Playbook
Whatsapp has 2 Bn usersbase doing on an average 10 sessions per day - 300 sessions a month → 600 Billion Sessions a month.
And let’s say that the user can be exposed to N number of services and help these companies acquire new users while staying within the app. This is the winning strategy that Wechat has very very successfully employed in China and which is something which has a good chance of working for Whatsapp as well.
But whether, they would be able to pull it off is another question.
Summary
So, all in all, this partnership gives JioMart a fair stab at targeting India’s burgeoning online Grocery market while also giving Meta an option to look at other options to monetise Whatsapp. Whether, it would create a 100 Bn USD behemoth - thats anybody’s guess. Let’s wait for 6 months and we would know directionally.
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