Tuesday, 21 January 2020

Reliance to gatecrash India’s online shopping sector

by Harry Baldock, Total Telecom
Friday 10 January 20

Asia’s richest man directs his considerable might in the direction of Indian online shopping – but will he have rival giants Amazon and Walmart quaking in their boots?

It seems that shaking the Indian telecoms industry to its core is not enough for Reliance and its maverick chairman Mukesh Ambani. Indeed, the company has now set its sights on the e-commerce market, launching JioMart, an online shopping platform.   Customers will use JioMart to order goods, which are then delivered to them from local shops…

It seems that shaking the Indian telecoms industry to its core is not enough for Reliance and its maverick chairman Mukesh Ambani. Indeed, the company has now set its sights on the e-commerce market, launching JioMart, an online shopping platform.
 
Customers will use JioMart to order goods, which are then delivered to them from local shops. To drum up interest, initial customers are being offered discounts and free delivery. 
 
As part of this ambitious strategy, Reliance will depend on the existing network of kiranas (small retailers), offering them a way to compete with online retailers who are currently undercutting them. 
 
This strategy is a double edged sword: on one hand, Reliance hopes to piggyback on the kiranas' existing network of loyal customers, giving them something of a headstart; however, adoption of this new service could be slow, as some traditional small retailers may be hesitant to change their ways and embrace service providers and new technology. If JioMart does not offer anything substantially different to competing services, then it will be hard to convince customers to change.
 
Amazon and Walmart’s Flipkart currently control around two-thirds of the Indian e-commerce market. However, regulatory changes last year mean that these enterprises are limited in how they can sell their own inventories. JioMart will face no such restrictions. 
 
“It’s not a level playing field,” said Arvind Singhal, chairman of consultancy Technopak. International retailers will subsequently face “huge disadvantages” in comparison to their local rivals. 
 
While these regulations may have opened the door to market upheaval, carving out a niche in the existing ecosystem is nonetheless a monumental task – one which analysts suggest could only be attempted by a company of Reliance’s size.
 
Many a western operator would surely love to attempt a similar break-in to their respective e-commerce industry, but this perfect storm of one-sided regulation, rapid sector growth, and available capital seems to be limited to India, at least for now.
 
 
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