Reliance Retail upcoming entry into the Indian online space is the biggest challenge for already established e-commerce companies like Amazon and Walmart owned Flipkart.
As per the latest report, Mukesh Ambani-led Reliance Retail is set to create massive disruption in the market.
About Reliance Retail
Reliance Retail, which operates massive 10,415 stores in more than 6,600 Indian cities having an annual footfall of 500 million.
Reliance Retail (which have a store like Reliance Trend) had $81 billion in revenue and $9.4 billion in profit during 2019.
Reliance Retail is the largest retailer in India, with $18.7 billion in revenue during the financial year 2019, and it grew at a CAGR of 55 percent in the last five years.
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.
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.
Reliance recently launched its food and grocery app among its employees in to prepare for the commercial launch later in the year.
The advantage of Offline retail stores will give advantage to Reliance to make it reliable and deliver products faster than other players.
Indian Retail Industry and Reliance Strategy:
According to the global market research firm Forrester, the online retail sales in India will grow at a five-year CAGR of 25.8 percent 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.
“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,”.
“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,” added Forrester.
“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.
The recent discounting example of Reliance is 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 Reliance launch,” Meena added.
“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.
“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 percent market share in 2018 (38.4 percent if you include Myntra and Jabong), closely followed by Amazon at 31 percent.