Mukesh Ambani is set to make big money out of India’s millions of small kirana shops

• A Bank of America Merrill Lynch states that Reliance Retail market value , will skyrocket to a massive $200 billion in two years.
• Since 90% of India’s retail market is unorganized and dominated by Kirana stores – Reliance might have a wide market to play in.
• Recently, Reliance Industries backed startup Fynd launched Uniket, a direct-to-retail solution, which will help shopkeepers in Tier 2 and 3 cities go online and expand their businesses.

Mukesh Ambani’s retail venture is unlike any other global ventures. Instead of eating up mom and pop stores like every other large retailer, it is juxtaposing its new e-commerce venture on mom-and-pop stores, or kirana stores as they are called in north India, by modernizing them.

This strategy of erasing lines between offline and online retail will earn it rich dividends, believes research firm Bank of America-Merrill Lynch (BofA-ML). In its latest report, the firm predicts that Reliance Retail’s market value will skyrocket to a massive $200 billion in two years. A big chunk of the value created will come from serving the kirana stores.

Since 90% of India’s retail market is unorganized and dominated by kirana stores--Reliance might have a wide market to play in.

So what is it that Reliance is offering these small stores?

1. Reliance Retail intends to help shopkeepers enter the new digital age and will be aided by an agile Jio, its innovation and country-wide strong network.
2. RIL’s Point of Sale (PoS) offering (or New commerce business, as the company calls it) will help merchants take online orders, generate GST-compliant bills, get inventory decline alerts etc. It can also help them migrate to GST and other tax regimes easily.
3. RIL also benefits by being able to offer Kiranas a faster delivery of replenished stocks, according to the report.
4. Even brands and consumers benefit in this initiative with Brands benefiting from better data analytics, better ads and promotion of their products. Customers could get access to discounts directly from brands without the merchant looking to offer incentives. Trials have already stated for this service, BoFA-ML said.
5. Ambani intends to add more services and offerings. At the IMC 2019 event, it introduced an app which will allow small businesses to make their own chatbot. That will directly aid the millions of kirana stores which could be connected in.
6. Recently, Reliance Industries backed startup Fynd launched Uniket, a direct-to-retail solution, which will help shopkeepers in Tier-II and Tier-III cities go online and expand their businesses.

The Kirana stores will take time to change their usage patterns but when they do, it could lead to its growth at breakneck speeds of 20% per annum, the research firm says. “We estimate RIL will tie-up with 5 million kiranas in FY21 and 10 million by FY22. We expect RIL to be able to charge ₹500-750 per month per kirana as a service charge for its M-POS device (rather than an upfront fee),” the report said.



Source: Bank of America Merrill Lynch report

In the worst case of growth, this kirana business will add to $6 billion to the enterprise value to the overall base value of $36bn – that’s at least one-sixth of the additional value created come from one segment. If this business picks up faster pickup – it can contribute as much as $25 bn from new commerce and that will increase the total retail business value to $70 billion, as per Bofa-ML’s calculations.

The icing on the cake for Reliance Industries’ investors will be the plan to spin off its retail and telecom ventures and list them individually.

In a bid to grow fast and stave off large national and international players who are established in the market like Amazon, Big Bazaar and others, Ambani is taking the road less travelled.