Ever since the late (and sorely missed) Clayton Christensen coined the words “disruptive innovation”, Global Corporates have reviewed their businesses and the future in the light of possible “disruptions” to their existing operations. These disruptions could be technological, social or commercial.
Does the Jio- Facebook deal, whereby the digital social media pioneer, Facebook, joins hands with India’s large Internet connectivity provider, have the seeds of a disruptive innovation? This one in the space of the hyper local Kirana store- the segment that even now accounts for 90% of the retail trade in the country. The USD 5.7 Billion investment by Facebook in Reliances’ Internet entity is small change for the former , but a mighty relief infusion of funds into the debt heavy latter. Facebook hopes that its data rich social platforms would provide synergy to an e commerce push in the Kirana sector- which according to both players is ready for a quantum, disruptive jump into digital space.
Amazon, of course was first of the block in this space, but management theory provides space for upto three players in any market.
A few questions, however, need clarity and it is here that innovation and disruption need to find suitable answers. Firstly, does a digitalized Kirana Store, deliver more volume to the same market or is adding a new market segment? Would his existing market segment of Rs25-100 ticket sized purchasers switch to a digital home delivered environment? This seems unlikely, not because the purchasers are not smart phone savvy, but because their drivers to purchase are driven by cash limitations and the benefits of choice or home delivery are out of their consideration set presently.
The second question is whether the Kirana Store is seeking a new market supported by logistics and accounting? The Kirana by tradition is a family driven business, catering to specific local needs working on personal contacts, trust and credit. Digitization takes the Store to a different orbit to a faceless customer and zero credit risk. The Kirana USPs disappears as they become digitized outposts to the Amazons, Wall Marts (and now Jio Marts) of the world. From his present personalized approach to sales, he needs to address a digitized input, and address it before any of the thousands others grab the sale. Every Kirana store now faces a new Competition – themselves. Today they co-exist, content with the returns from their physical inputs. A computer screen will drive wedges into their harmony. Will they accept it is the moot question? Would greed overcome tradition?
The third question is whether the Kirana Owner requires to be inculcated “…a sense of entrepreneurship, instill a sense of discipline and develop a rewarding ecosystem.” as opined by the spokesperson of an e Commerce major. The Kirana is an ecosystem by itself, serving an economic need in a small geography. The MNCs have tried over the years to disrupt this ecosystem. Their sudden wooing is an acknowledgment of its uniqueness. To attempt a change in the ecosystem through a logistics driven, information heavy one is a risky venture. But the players have money, pots of it, and if they are not happy with the current markets, they do need to seek out new pastures.
Author
Sridhar Chari, Sapience Research