Reliance Upcoming eCommerce Vs Amazon/Flipkart
Introduction
There is no doubt that online retail still has a lot of potential in India. Deloitte India and Retailers Association of India (RAI) report have predicted eCommerce market to grow to $1.2 Tn by 2021. Online players still make for 3% of the total retail market in India, and the prospects are still huge. So for Mukesh Ambani, as the chairman of Reliance Industries, it’s an unavoidable opportunity. One part of Reliance Retail— the apparel brand Ajio — is already online. Now, he is looking to expand the offerings beyond apparel.
Also, with the Indian government taking its stand on finalising the eCommerce guidelines, the segment will get organised further and in favor of the local players.
Reliance Retail Announcement
In 2018, Reliance Retail announced its entry into the eCommerce space with an online-offline hybrid model, since then Reliance is acquiring a lot of business to make their eCommerce business successful. If we look at the past, Reliance never jump into the competition without any plan and when they plan, they make rivals out of the competition. It is well known that, when they execute on something they execute really well. Jio is the recent example, they disrupted India’s telecom market and forced the incumbents to move quicker and reduce prices — mobile data is reportedly now cheaper in India than anywhere else on the planet. Except 2 telecom companies Airtel and Vodafone who are struggling these days, all others are out of the industry.
Future Group CEO Kishore Biyani & eCommerce
Future Group founder and CEO Kishore Biyani started exploring eCommerce in early stage. The retail baron had launched retail arm of the group futurebazaar.com perhaps before Flipkart was founded, but it was not gone as per plan. In 2016, the group had also shuttered another online retail venture Big Bazaar Direct three years after its launch. He also acquired FabFurnish.com, online furniture and home furnishings store in 2016, was later merged with its home furnishing brand HomeTown. As per media reports, Future Group suffered losses of Rs 300-350 crore in its online ventures including Rs 250 crore loss in futurebazaar.com.
Even after having the large supermarket chain, retail kings has been skeptical about e-commerce and has long maintained that he will not venture into the space until he sees a route to profitability. As per current news, Amazon is set to acquired 49% of Future Coupons Ltd (FCL), a Future Retail promoter group company.
Current Scenario
At present, online retail industry that is dominated by US giants Amazon and Walmart Inc.-owned Flipkart. Both are burning big investment to increase their valuations and creating vendors-customers database. They must be understanding, customers are going online because of the unbelievable discounts. Indian consumers are not loyal to any online platform or brand yet. These companies should probably stop offering hefty discounts to see the real customer base instead of burning investors’ money, and if they do, it may lead to a significant loss of buyers from their platform.
To compete with Amazon and Flipkart, Reliance will have to significantly improve the customer experience, both in stores and on its online channel, because discounts and cashbacks will not generate loyalty for online customers. A recent instance of such a flop show was WeWork that operates like a marketplace for co-working spaces. The company, which has so far been burning the cash of its private equity backers, failed to attract retail investors for its planned IPO even at a valuation that is less than a fourth of its last fund raising in January 2019 when Softbank invested in the American firm at a valuation of $47 billion. It had to call off its IPO last month. And, now, Softbank is likely to take control of WeWork. If eCommerce companies in India keep on burning cash, a similar scenario like WeWork may not be far off.
Amazon’s CFO said during an interview, “more Prime members joined India’s Prime program in the previous year than we’ve seen in any other country in the history of the world” but this is also a fact that Telecom service providers Vodafone, Airtel and BSNL offered free Amazon Prime membership to their subscribers under certain plans, thanks to the price war in the Indian telecom industry.
Recent Acquisitions by Reliance Industries
Now, comeback to the Reliance and let’s have a look at their recent acquisitions that can help in its eCommerce venture.
1) Fynd
Fynd was founded in September 2012, acts as a bridge between physical retail stores and buyers online and work on O2O model. Google is one of the early investors in Fynd. Fynd’s eCommerce platform would be integrated with Reliance Retail and the conglomerate’s upcoming eCommerce service, which would work on an offline-to-online (O2O) model.
2) Hamleys
One needs to wait and watch if Reliance Retail through its Hamleys acquisition will affect the Walmart and Amazon in the same way they affected Toys R Us globally. Reliance Industries Rs 620 crore buyout of British-origin Hamleys gives it access to the Hamleys’ network of 167 stores in as many as 18 countries. In fact, this acquisition is the Indian retailer’s first move to fight Amazon and Walmart on the global turf.
3) Tesseract
Tesseract has launched three hardware and two software products in the MR, AR, and VR spaces. On the AR side, the company is focused more on “content consumption” while in VR, it concentrates on “content capture”.
4) Grab
They provides services ranging from on-demand, reverse deliveries, first mile, and last mile logistics. Some of its clients include McDonalds, BigBasket, Myntra, Amazon Now, Swiggy. The move will help the company strengthen its logistics service for its eCommerce venture.
5) Reverie
Reliance investment in Reverie will enhance the group’s digital initiatives, including building digital consumer platforms with multilingual capabilities.
6) Rhea Retail
Company involved in wholesale distribution of women’s, children’s, and infants’ clothing and accessories.
7) Genesis Luxury
Genesis Luxury sells a diverse brands including Burberry, Canali, Paul Smith, Armani, Just Cavalli and Jimmy Choo.
Apart from above, Reliance Retail is already testing a food and grocery app among employees before the commercial launch of its e-commerce platform. Reliance Retail, the retail arm of Reliance Industries, has five brands: Reliance Fresh, Reliance Smart, Reliance Market, Reliance Digital, and Reliance Mall. According to the company website, Reliance Retail, currently runs about 10,415 retail stores across 6600 cities in India, serving 5 million customers every week. The company is also planning to open grocery stores in Tier 3 and 4 towns with population of up to 75,000. Reliance has plans to connect 30 Mn neighborhood stores to the online shopping platform.
Final Comment
Personally I think Reliance is most suited for an eCommerce business as they have the capital strength, wide offline presence, good brands under umbrella and significant grocery operation. But eCommerce is not an easy market to navigate, even for domestic players. This will definitely challenge the position of existing eCommerce players and also attract new online buyers, which will be good for the segment.
