Jeff Bezos’ sprawling e-commerce empire in India is staring at its moment of truth, once again. Earlier it was back in 2013 when Amazon entered the really nascent and pretty much untapped e-commerce marketplace characterised by an underdeveloped infrastructure with only 16 per cent population connected to the world-wide-web, and money being the undisputed king. The then e-commerce marketplace had Flipkart and Snapdeal arguably the only and major e-commerce players. Amazon was capable to swiftly adapt itself to the Indian way of promoting goods on-line and flush with capital, as it normally is getting an world-wide-web powerhouse in the US, elbowed out Snapdeal to take Flipkart head-on and overcome the challenges. The differentiator then was largely the capital, now it is more of an enabler as the planet’s richest particular person Bezos gets into the e-commerce slugfest with Asia’s richest billionaire Mukesh Ambani.
The Edge
What’s on the block is pretty overt – the e-commerce marketplace of amongst the quickest-expanding economies in the globe – India, reaching $99 billion in size by 2024, according to Goldman Sachs. There is likely no other important economy in the globe supplying that level of scale. And to win this marketplace, which is merely 1.6 per cent of the total retail sales, according to a 2019 World Bank Group report, offline or regular retail is the slingshot that would catapult Reliance, Amazon, or Walmart to lead the marketplace comfortably for the following decade and additional.
Reliance, Amazon, and Flipkart didn’t respond to the questionnaire looking for responses to this story.
For Ambani, it is specific that Reliance currently has a clear headway when it comes to regular retail with 11,931 retailers, as of September 30, 2020. Reliance Retail has been operating neighbourhood retailers, supermarkets, hypermarkets, wholesale money & carry retailers, and so on. beneath a multi-pronged technique in close to 7,000 towns witnessing 640 million footfalls that have offered Ambani unprecedented procurement base and fulfillment strength. The shift from oil and telecom to technologies and e-commerce is also pretty evident at Reliance. Reliance Retail Ventures raised about $6.4 billion from Silver Lake, KKR, Mubadala, Abu Dhabi Investment Authority, GIC, TPG, General Atlantic and Saudi Arabia’s Public Investment Fund to double down on its e-commerce bet JioMart.
According to Reliance, JioMart continues to scale-up quickly with a constant boost in everyday client orders — 4X up in Q2 more than Q1 FY21. In truth, in Q1 itself, Reliance had claimed to provide more than 4 lakh orders each and every day “which is significantly higher than any other grocery home delivery company,” it had stated in a statement. Following Facebook’s $5.7 billion investment in Jio Platforms, Ambani had also enabled ordering groceries through WhatsApp. In the previous handful of months, JioMart had expanded to style and electronics as nicely – amongst segments that drive sales for current massive e-commerce marketplaces. Reliance’s intention to push these important segments very first for the larger e-commerce play ahead is clear. “Reliance definitely has a head start in omnichannel sales because of its physical presence. We see the company building on it through investments in technology and customer experience,” Madhur Singhal, Managing Partner, Praxis Global Alliance told TheSpuzz Online.
Way Out
The current ruling by the competitors watchdog Competition Commission of India (CCI) in favour of the Rs 24,713-crore Reliance deal to obtain debt-strapped Future Group’s retail, wholesale, logistics, and warehousing companies would additional add to Reliance’s retail strength. This may possibly be a short-term setback for Amazon as it would shed prized access to more than 1,500 retailers such as Big Bazaar, Food Bazaar, FBB, Food Hall, Easyday, and more across more than 400 cities amid $6 billion investment commitment Bezos has created in India so far such as the $1 billion he announced in January this year. The organization has also been operating numerous initiatives to enhance smaller companies in the nation and to ramp its 7 lakh seller base.
Amazon, which anyways has been an aggressive competitor, is anticipated to be firing on all cylinders to get more smaller companies and kiranas on its marketplace in case it sooner or later loses to Reliance in laying its hands on Future’s assets. “Reliance is the largest offline player and in the organised grocery, they have around 25 per cent market share while Future has around 10 per cent share. So that’s why Amazon was interested because if they cannot work with Reliance, which is number one, then they would want to work with number two and have fighting chance in grocery,” Satish Meena, Senior Forecast Analyst, Forrester told TheSpuzz Online. Here, Walmart-owned Flipkart has been lacking, in contrast to other categories such as style, not just against Amazon and JioMart but also BigBasket and Grofers.
Amazon India’s base of 7 lakh sellers, which are mainly micro-companies, not too long ago surpassed the U.K. and Germany marketplaces to turn out to be the second-biggest marketplace in terms of the quantity of sellers. In truth, Amazon has been onboarding more sellers on its India marketplace than in other markets exactly where it is present except the US, according to Marketplace Pulse study. The organization has been adding 20,000 sellers more than the previous handful of months. Bezos, for the duration of his India trip, in early 2020 shared plans to get more than 10 million (1 crore) micro, smaller, and medium enterprise sellers on-line by 2025. The figure appears a really extended shot unless Amazon is somehow capable to drastically boost the seller base and especially micro-enterprises, which make up for a majority of companies in India, that have been averse to technologies adoption. Close to 99 per cent of Indian enterprises have come beneath the MSME category right after the current revision of the MSME definition by the government.
The Crux
However, in its battle with Reliance, the differentiator would be the encounter considerably like in its competitors with Flipkart as all the 3 players are very nicely-capitalized. “Amazon by far is the most successful e-commerce player in the world. They got strong technology strength, huge capital access, strengths of operating in various parts of the world, bringing very strong private labels of their own across multiple categories. Also, Amazon doesn’t have to go back to investors to raise money. Reliance has to do all that as far as e-commerce is concerned while their execution and capital raising skills is amazing,” Arvind Singhal, Chairman, Technopak Advisors told TheSpuzz Online.
While Reliance has strength in offline and B2B segment but on-ground, it lacks experience in operating pure-play on-line organizations, according to specialists. “Ultimately here the winner would be a company that can provide customers a large number of products and superior customer experience. Even if you convince them for some time on pricing but after that customers will look for experience, something which Reliance needs,” an e-commerce consultant told TheSpuzz Online.
“Reliance surely has a pervasive brand name and deep offline presence across cities. They are also well-capitalized. However, e-commerce systems, protocols, supply chain, user interface, and consumer trust will take time to build. While capital can short circuit that time, but the team needs to be pulled together,” added Madhur.
Particularly for pricing, which is a important element to pull very price tag-sensitive Indian consumers to shop on-line, Reliance may possibly attempt to replicate its telecom achievement with Jio by lowering costs and supplying more affordable goods to almost stifle competitors. This may possibly work nicely to cater to the shoppers especially living in semi-urban or Tier-III and beyond regions who are more worth-conscious than urban purchasers but it just can not be a extended-term bet.
Meena explains that the pricing element operates nicely in telecom but in e-commerce you have to give the identical encounter on each and every order. In telecom, normally, individuals take the connection and use it for a lot of years but in e-commerce, if one particular does not get a superior encounter on one particular portal, he/she will switch to a different. One may possibly not do that regularly with the telecom provider exactly where there is a procedure to switch. So, you have to provide a far better encounter. He added that Reliance is not a pure-play B2C organization run by technologies that is prepared to take on e-commerce. There are Reliance retailers, there will be Future’s retailers presumably and then you are working with kiranas and also you have warehouses. So, these 4 distinctive places you have to integrate and optimize to provide from the nearest shop to client. In the backend, a lot of factors have to be carried out for integration and this will not be straightforward, he stated.
Headwinds
The regulatory suggestions for the e-commerce sector, which have to an extent established to be headwinds for Amazon and Flipkart, may possibly also play their function ahead as nicely. However, they will not be as aggressive as China’s. The government’s 2018 Press Note 2 permitted one hundred per cent FDI in B2B e-commerce although marketplaces are expected to meet specific criteria. Also, the marketplaces are not permitted to physical exercise ownership more than inventory retailed on the portal or influence their sale straight or indirectly. Moreover, any seller entity wherein the marketplace has an equity stake can not sell on-line. Amazon, for instance, had to reportedly restructure its ownership in Cloudtail to bring down its stake to 24 per cent from 49 per cent following the new FDI norms enforced in February final year.
The government had also tightened FDI policy earlier this year for investments from nations sharing a border with India to curb ‘opportunistic takeovers’ of domestic firms — a step noticed in the light of restricting investments from China and enhance Make in India and Vocal for Local campaigns. With the tweaked rule, the entities primarily based in neighbouring nations can invest only beneath the government route.
“You will see some kind of regulations which give preference to Indian companies but It is not going to be very aggressive like China because India still needs investments,” the e-commerce consultant stated. “The Government has managed to create a pro-business environment in the last few years. There has been no reversal of any FDI norms. In fact, foreign investment is being relaxed every passing hour. There is a drive to self-reliance from a manufacturing/production perspective but that has not changed anything in retail,” added Madhur.
Nonetheless, for Reliance, the initial battle would be to obtain marketplace share by establishing itself as an alternate to Flipkart and Amazon in customers’ minds as an alternative of jostling for the bragging rights for getting on major of the table. Even with a close second or third rank, Reliance would very most likely be a considerable player in the Indian e-commerce marketplace and that shouldn’t irk Ambani.