Reliance Threat for Amazon, Walmart

mukesh_jio

Outlining the plan at Reliance Industries Limited AGM, Mukesh Ambani says the effort will involve the group’s Reliance Retail and Reliance Jio

By DANFES

The Indian retail e-commerce market which is dominated by Amazon and Flipkart at the moment holds immense potential. In fact, both the companies are trying to put their best foot forward in a bid to gain further traction in this prospective market. Both the companies are employing aggressive retail strategies, expanding seller base and distribution strength to get an edge over the other.

However, Mukesh Ambani, chairman of Reliance Industries, has put a spanner in the works with his plans of developing an e-commerce platform by combining Reliance Retail and Reliance Jio Infocomm, in a bid to bolster the presence of Reliance in the market.

The Reliance Industries Limited (RIL) plans to take on the likes of Amazon.com Inc. and Walmart Inc.’s Flipkart Online Services Pvt. Ltd in retail by creating a platform that combines online and conventional shopping.

Billionaire chairman Mukesh Ambani outlined the plan last fortnight at the company’s annual shareholders’ meeting in Mumbai. The effort will involve the group’s Reliance Retail Ltd and Reliance Jio Infocomm Ltd businesses, he said. The latter will also introduce a fiber-based broadband service 15 August.

Global retail powerhouses like Amazon and Walmart have been investing in India’s retail industry, where e-commerce sales could more than double to $72 billion by 2022 from $32.7 billion in 2018, research firm eMarketer estimated. The retail-to-refining conglomerate is looking for growth in e-commerce after spending as much as 2.5 trillion rupees ($36.3 billion) in setting up mobile and fiber broadband infrastructure, Ambani said.

The platform will use augmented reality, holographs and virtual reality to create an “immersive shopping experience,” Ambani said, without giving a timeline or financial targets. The service will be available to small merchants as well, enabling them to “do everything that large enterprises and large e-commerce players are able to do.”

Walmart, the world’s largest retailer, said in May it will acquire a 77 percent stake in Flipkart Group for $16 billion, leaving the remainder to Flipkart co-founder Binny Bansal and other shareholders.

Other news from the shareholder meeting:

         Jio aims to introduce fiber broadband in 1,100 cities nationwide;

         The e-commerce venture will leverage 350 million footfalls in Reliance Retail stores, 215 million Jio subscribers, and the target of 50 million fiber broadband homes and 30 million small merchants; and

         Carrier has introduced JioPhone2, an upgraded version of the feature phone offered for an initial price of 2,999 rupees. The upgrade allows access to Youtube, Whatsapp and Facebook

Reliance shares fell 2.6 percent to 964.50 rupees in Mumbai.

Hathway Cable and Datacom Ltd., a provider of cable television and broadband services, plunged 15 percent, its biggest decline since 2010, while DEN Networks Ltd. dropped 10 percent on expectations Ambani’s Jio will intensify competition. The carrier may look to gain fiber broadband subscribers by offering lower prices and some free services, a strategy that worked for Jio’s phone services.

This initiative of Ambani is likely to pose serious threat to the dominant players as well as the other e-commerce giants which are yet to establish themselves namely Alibaba BABA and eBay EBAY.

Further, the platform will be based on online-to-offline (O2O) marketing program, which will aid in attracting customers online and allowing them to shop via offline channels. Consequently, the hybrid model bodes well for the interests of domestic brick-and-mortar stores as these will get a platform to showcase their products online, bolstering their sales numbers.

Additionally, this is likely to benefit the traditional Indian buyers who account for a significant share in the total Indian population and are hesitant to shop online due to issues regarding product quality.