Amazon V Facebook

Facebook invested $5.7 Billion for a 9.9% stake in Reliance subsidiary Jio, this will help Jio Mart users to make payments through Whatsapp, which is the most widely used messaging app in India. Jio Mart helps local grocery stores to connect with consumers nearby with the help of e-commerce.

Jio Mart is seen as a competition to ‘Local Stores by Amazon’ which also allows local grocery stores to connect with consumers in their locality. The service was launched six months ago on a trial basis. However, Local Stores, the stores themselves are responsible for delivering the goods, while in Jio Mart goods use its own delivery system to deliver the goods, this includes employees of Jio Mart to pick up goods from the store and deliver it to the consumer.

During the coronavirus pandemic the need to deliver essential goods such as groceries at the doorstep is paramount and consumers may also be willing to pay extra for this service.

Facebook and Amazon are among the largest corporations in the world and their new battlefield is in India. Express delivery is a relatively small but growing industry, companies such as big basket have already established themselves but Amazon and Jio Mart come with an already existing user base and brand name. Using Whatsapp to pay for the goods is the biggest advantage, since most people are familiar with it and Whatsapp pay which has plans to launch in India soon will add to it.

Since both companies have entered at nearly the same time, in order to maximise their customer base they will need to prove themselves to the consumers and hence this may lead to a price war where they may provide offers or a non-price offer where they may guarantee delivery under a certain time.

For the local stores for which foot fall has decreased due to the Covid-19 pandemic, these online services provide an opportunity which allows them to sell goods and increase revenue, this injection into the economy leads to the aggregate demand increasing. It also increases money circulation and using the keynesian multiplier, GDP will also increase. Employment will also be created and the negative economic impact of the pandemic may be reduced.

However, for the middlemen, Amazon and Facebook which are companies based in the United States, the profit may be sent back home and this will be a leakage to the Indian Economy at a time where the economy is in severe need for injections in order to boost demand and stay out of recession.

Image Source- medium.com

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