Reliance Industries’ online wholesale platform JioMart has recently fired more than 1,000 workers as it integrates its operations with Metro Cash and Carry, the German retailer that it acquired for Rs 2,850 crore last week. This is part of a larger plan to cut costs and improve margins in the highly competitive grocery B2B space, where JioMart competes with players like Udaan, Flipkart Wholesale and Amazon B2B.
According to sources familiar with the development, JioMart has asked over 500 executives at its corporate office and another 500 people on the ground to resign in the past few days. It also intends to reduce its 15,000-strong workforce in the wholesale division by two-thirds in the next few weeks. Hundreds of employees have already been put on performance improvement plan (PIP), while the remaining sales staff have been shifted to a variable pay structure after their fixed salary was lowered.
JioMart, which replaces traditional distributors for kirana stores, has also decided to shut more than half of its 150-odd fulfilment centres that supply groceries and general merchandise to neighbourhood stores. The move comes as JioMart aligns its operations with Metro Cash and Carry, which has 31 stores and 3,500 permanent employees in India.
JioMart had started a price war in the grocery B2B segment last year by offering deep discounts to kirana stores, which prompted traditional distributors to threaten to stop supplies from consumer products companies. However, JioMart is now looking to focus on profitability and reduce losses, as it faces stiff competition from other online B2B platforms that offer better service and delivery.
Experts say that consumer product companies are increasingly shifting to online B2B platforms, either as an addition to their current distribution network or as a replacement for ineffective traditional distributors. Online B2B platforms have a higher return on investment (RoI) than offline retail or cash and carry formats, as they can leverage data analytics, artificial intelligence and machine learning to optimise inventory, pricing and demand forecasting.
JioMart’s acquisition of Metro Cash and Carry is expected to give it access to a wider range of products, customers and suppliers, as well as strengthen its supply chain and logistics capabilities. However, it will also have to deal with the challenges of integrating two different business models and cultures, as well as retaining talent and customers in a dynamic market.