Monday May 27, 2019
Home Lead Story Reliance to E...

Reliance to Enter the e-commerce Industry: Report

Reliance is looking at toppling Amazon and Walmart-Flipkart from their top positions. Paytm Mall is just a small competitor in comparison

0
//
In this photograph taken on June 6, 2013 Reliance Industries Chairman Mukesh Ambani poses as he arrives for the company's annual general meeting in Mumbai. India's 100 richest people are for the first time all billionaires, according to an annual Forbes survey released September 25, 2014, with the country's top earners worth a third more combined than last year. Industrialist Mukesh Ambani topped the list for an eighth straight year with a 23.6-billion dollar fortune, Forbes India said on its website. AFP PHOTO/Indranil MUKHERJEE/FILES

When Paytm Mall started, it took a cue from its investor Alibaba and aimed to become a digital universe for everything.

As part of its initial offers, the company started giving cashback to attract customers.

According to Pavel Naiya, Senior Analyst, Devices and Ecosystem at Counterpoint Research, it was a short-term strategy and gaining royalty in the long-term in a price-sensitive market like India was an uphill task which depends on multiple factors, including service delivery, exclusive offerings and additional product bundling, etc.

“As cashback disappeared, so did the customers,” said Naiya.

Paytm Mall stopped fighting the low-margin, high cash burn e-commerce battle, and began altering its strategy to become an O2O (online to offline) platform for small sellers.

The announcement by Reliance to enter the fray was really worrisome for Paytm and its owners.

“Reliance is working on creating the world’s largest online-to-offline New Commerce Platform,” said Mukesh Ambani, Chairman and Managing Director, Reliance Industries said at the “Make in Odisha Conclave” in November last year.

With a deep footprint in over 10,000 Reliance Retail outlets pan-India, Reliance has a definite edge over all other retails players out there.

Reliance
Reliance.

Reliance has capital, an unending capacity to scale up, massive retail footprint and resources to beat the competition. Mukesh Ambani aims to become the top retail player in the country and can easily do that like he has done with Reliance Jio,” Satish Meena, senior forecast analyst at Forrester Research, told IANS.

One thing that has always worked in Reliance’s favour is their deep discounting strategy and this will be the key differentiator with their ecommerce platform too.

“Paytm Mall faltered owing to adopting a wrong model. It is looking at a very difficult time ahead as unlike China, India is yet to mature for the online-to-offline (O2O) marketplace,” Meena said.

Thomas George, Senior Vice President and Head of CyberMedia Research (CMR) went a step further.

Also Read- BJP Member Files Defamation Complaint Against Arvind Kejriwal

“I will not be surprised if Paytm could be an acquisition target for Reliance or Alibaba to pursue their India e-commerce business opportunity,” George told IANS.

Alibaba never saw long-term growth in the e-commerce sector in India so they placed their bet on the burgeoning digital payments sector which, according to Google and Boston Consulting Group, will be worth $500 billion by 2020.

Paytm Founder and CEO Vijay Shekhar Sharma thought otherwise and the result is for everyone to see.

“Reliance is looking at toppling Amazon and Walmart-Flipkart from their top positions. Paytm Mall is just a small competitor in comparison,” said Meena. (IANS)

Next Story

Reliance Retail Set to Disrupt Amazon, Walmart-Flipkart

The eCommerce competition in India remains fierce

0
Reliance Jio. Source: www.reliancejio.website

Reliance Retail’s upcoming entry into the online retail sector is the biggest challenge for Amazon and Walmart-Flipkart as the Mukesh Ambani-led behemoth is well positioned to create massive disruption in the market, a new report has stressed.

According to the global market research firm Forrester, the online retail sales in India will grow at a five-year CAGR of 25.8 per cent to reach $85 billion by 2023, despite the hiccups of demonetization in 2016, GST in 2017 and the governmental changes in eCommerce policy announced last December.

The time is ripe for Reliance Retail, which operates 10,415 stores in more than 6,600 cities, with 500 million annual footfalls – giving the company the kind of scale required to swiftly launch India-based operations.

“One of the things that will trouble Amazon and Flipkart is Reliance’s history of launching operations via massive discounts,” Satish Meena, senior forecast analyst at Forrester Research, said on Tuesday.

Reliance entered the telecom sector in 2003 with the Monsoon Hungama tariff plan, which brought tariffs for voice calls down to just Rs 0.40 a minute from the existing rate of Rs 2 a minute, followed by the launch of Jio 4G plan in 2016 that dropped data rates from Rs 250 per GB to Rs 50 per GB.

“This kind of discounting can disrupt any market, and we expect something similar to happen in the grocery space during Reliancea¿s launch,” Meena added.

Reliance is fast working on creating the world’s largest online-to-offline New Commerce Platform, according to Mukesh Ambani, Chairman and Managing Director, Reliance Industries.

“Due to the recent changes in eCommerce policy and the restrictions on an inventory-led model for marketplaces with FDI, Reliance Retail is finding a favourable policy environment to launch operations where it can use its existing retail infrastructure to deliver goods to customers,” the Forrester report noted.

Reliance launched the food and grocery app among its employees in April 2019 to prepare for the commercial launch later in the year.

Reliance Retail is the largest retailer in India, with $18.7 billion in revenue during financial year 2019, and it grew at a CAGR of 55 per cent in the last five years.

Reliance Retail had $81 billion in revenue and $9.4 billion in profit during 2019.

e-commerce
Security guards stand at the reception desk of the Amazon India office in Bengaluru, India, Aug. 14, 2015. VOA

“This gives Reliance Retail access to long-term capital from the conglomerate, which has a presence in energy, petrochemicals, telecom, textiles, retail, and natural resources,” said Forrester.

Reliance Retail also has a portfolio of over 40 brands, from the midmarket to premium segments and including Hamleys (which the company has acquired for Rs 620 crore) and Marks & Spencer.

“These can provide a boost to the fashion and lifestyle segment, which will be the largest category by online spending in the coming years,” said the report.

Reliance launched its mobile business at the end of 2015, and by April 2019, it had over 300 million mobile subscribers a” making it the third-largest player in a short span of time.

Jio is building on these mobile subscribers by investing in related services to create an ecosystem that gives customers access to rich content and payments options.

This ecosystem will be available for Reliance Retail to build on.

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” as we saw in the Paytm Mall case.

Also Read- US Temporarily Loosens Restrictions on Huawei Products

“Removal of discounts may lead to a significant loss of buyers from the platform. The positioning of the Reliance platform and its fulfilment will play a critical role in the fight against Amazon and Flipkart,” emphasised the Forrester report.

The eCommerce competition in India remains fierce.

Amazon has been the most popular online retailer since it surpassed Flipkart in 2016, although Flipkart is still the single-largest online retailer, with 31.9 per cent market share in 2018 (38.4 per cent if you include Myntra and Jabong), closely followed by Amazon at 31 per cent. (IANS)