After shaking up India’s telecom industry, the Reliance Group could re-cast the country’s e-commerce leaderboard next.
eCommerceTrendz Thought Corner
The retailing arm of India’s most valuable company by a distance is poised to make a major foray into e-commerce early FY19, selling mobile phones, consumer electronics, fast-moving consumer items, food and grocery in towns with 50,000 residents.
“Reliance Retail has plans to compete with Amazon and Flipkart by offering a wide selection of products, (with the promise of) same or next day delivery even in small towns where aspiration level is high but availability is a problem, and through exclusive deals,” one of the industry executives said to ET.
The news comes a month after former Infosys CFO Mohandas Pai declared that Reliance Retail will challenge e-commerce giants like Amazon and Flipkart through its wide distribution network as well and telecom clout.
“In e-commerce, the biggest threat to Amazon and Flipkart will be Reliance Retail because Reliance Jio is there all over India; they can easily connect to all the small, small retail stores and supply to them and improve their business dramatically,” he had said.
A Smart Move
India has 432 million internet users, but only 60 million online shoppers. The e-commerce industry, including online food delivery, is just $15 billion a year, or 40 percent less than Alibaba Group Holding Ltd.’s Singles’ Day sales in China.
According to Andy Mukherjee, a Bloomberg Gadfly columnist, “The inflection point in a 10-year journey from $15 billion to $200 billion will come after five years because that’s how long it takes for new internet users to get comfortable shopping in cyberspace. Most Indians who have internet-ready phones have only bought them over the last couple of years, thanks to a 36 percent decline in the cheapest 4G handset in the past 15 months. In other words, they’re experiencing the web for the first time.”
Jio already has an existing base of over 130 million subscribers and it may want to speed up e-commerce by joining hands with bricks-and-mortar.
Users of the e-commerce service will get digital coupons which they can use to buy products at their nearby stores. Redeeming a gift voucher at a neighborhood store is a familiar transaction; a digital coupon is a slight tweak. It’s reasonable to expect that Indians’ familiarity with digital payments will grow more quickly than their penchant for online shopping. Coupons will be brand specific and partner stores will be enabled with software to read the coupons. This service will also help brand partners channel their inventory effectively through offers.
This new stint is also going to benefit the firm to a greater extent as offline grocery and department stores account for 80-90 per cent of the overall retail transactions in India.
In food and grocery, Reliance Retail wants its e-commerce platform to account for 50% of the consumer’s monthly purchase, while in mobile phones and electronics it will offer a selection of 50,000-plus models, including online exclusive deals.
“The differentiation will lie in wider selection and sales of fruits and vegetables that no other e-commerce venture in this segment has been able to crack successfully. Apart from utilising the brick-and-mortar store network, additional fulfilment centres will be set up for food and grocery,” an executive said.
E-commerce Majors Bolstering Offline Presence
Interestingly, both Flipkart and Amazon are also slowly bolstering their offline presence. Amazon recently picked up a 5% stake in Shoppers Stop for $27.8 Mn(INR 180 Cr), signaling it’s looking beyond online to expand its presence in the Indian market and that success in retail would not come merely from an online presence, given that e-commerce is still less than 5% of total retail sales in India. Amazon India also planned to open 12 offline stores in three Indian cities to facilitate its fashion sale event. The e-commerce major has made this move to facilitate its upcoming sale event.
Hence with Flipkart and Amazon pushing to expand offline, Reliance Retail will have to move in their opposite direction if it intends to enter the e-commerce space, famous for its wafer thin margins. Given the fact that it too has no dearth of funds, Reliance Retail could prove a formidable competitor to deep pocketed Amazon and heavily funded Flipkart, though both have a considerable head start in the game.