Will Reliance’s e-commerce move disrupt online retail forever?

RIL’s Jio venture disrupted the telecommunications space and forced some players to shut shop and others to merge. Its foray into e-commerce is expected to cause a similar dynamic

Reliance

For the e-commerce sector, year 2019 may turn out to be the biggest disruptor. The recent news that Mukesh Ambani-led Reliance Industries Ltd (RIL) is planning to foray into e-commerce has set speculations rife that the industry is slated for a big change.

The government too recently came up with a new e-commerce policy which desists e-commerce players with foreign investments from offering deep discounts or selling their own products. Given the way RIL’s Jio venture disrupted the telecommunications space and forced some players to shut shop and others to merge, its foray into e-commerce is expected to lead to a similar dynamic.

We spoke to some brand and marketing experts about RIL’s planned foray into e-commerce and what it means for the sector, here is what they had to say.

According to Sushil Matey, Director – Marketing, Livpure, Reliance’s entry in e-tail is a defining moment in the journey of e-commerce in India.

"In my view, it is disruptive. Jio has 280 million subscribers and 10,000 retail stores. The number of online shoppers were 120 million in 2018. If bulk of the Jio subscribers start transacting and the others too shift, this alone shall give Jio a huge headstart.”

Another factor that, Matey thinks, would work for Reliance is the ease of last-mile connectivity. “The last-mile execution is not only the biggest pain point but it is also the most expensive cost point in the value curve. It’s exactly here that Reliance’s 10,000 retail stores pan India shall come in handy. As of now, Amazon and others are executing the last-mile delivery through tie-ups with courier agencies, thereby incurring slightly higher costs," said Matey.

He believes that in Reliance’s case, the stores could become local warehouses. And this, apart from saving cost, will enhance the consumer experience because of faster delivery, especially in Tier 2 & Tier 3 towns. “Also, government’s preference to support Indian entrepreneurs and Reliance’s pitch on data colonisation shall further strike a chord with Indians. All in all, Jio’s entry shall disrupt this game totally,” concluded Matey.

For seasoned marketer Anamika Sirohi, the move by RIL is not surprising. Their previous foray into retailing through Reliance Retail would hold them in good stead, she believes.

“The one thing we can all agree on is that the gentleman in question doesn’t believe in half measures. The difference here, of course, is that he is up against global behemoths with huge war chests. But, the game has not yet been played, and the rules are not cast in stone since the online shopping behaviour of Indian consumers is not mature,” said Sirohi.

Stating that the shakeup in the e-commerce space is inevitable, she added, “It will be interesting to see how their ‘Made in India’ model, which does not rely on inventories, works out. A shake-up is inevitable and if the telecom example is any indicator, the category will look very different very soon.”

Reliance Retail in its offline avatar has witnessed phenomenal growth over the past five years. According to media reports, its annual revenue increased two-fold from ₹337.65 billion to ₹691.08 billion from 2017 to 2018. It has also been reported that Ambani’s gameplan for his e-commerce venture includes utilising the 5,100 smaller Jio Point stores spread across 5,00 cities as last-mile connectivity for its e-commerce platform. 

LK Gupta, Founder, CMOnow Marketing Consulting LLP, is of the view that whenever Reliance goes big in any sector, one can expect disruption for sure.

He explained, “Their modus operandi in other categories has been to disrupt with affordability and pricing. But I'm not sure if that will qualify as a disruptor in e-shopping since consumers are already used to predatory pricing in this space from the incumbents. That said, we know that the top 5-10 per cent of consumers have been saturated in terms of online shopping penetration, so a challenger needs to expand to the next 20 per cent. My guess is that Reliance will meet success if they're able to rope in the segments below the top 10 per cent and build great shopping experience for them through effective leverage of Jio customer base combined with mobile-based content and their on-ground retail presence.”

While RIL’s proposed move is largely seen as disruptive, Saurabh Uboweja, international brand expert and CEO of Brands of Desire, feels that Reliance’s entry may definitely expand the e-commerce market but it will not disrupt it as the sector has enough space for new entrants.

“Building and running an e-commerce operation at the scale & size of Amazon and Flipkart is a more complex business operation than the telecom sector that was relatively more mature with unit economics well defined when they entered. E-commerce requires a totally different set of capabilities to be developed at that scale,” said Uboweja.

“It is unlikely that the new entrant will be able to hive off a significant market share or seller base from the incumbents as there is enough potential to add new consumers and sellers. So one may not see disruption, but we will surely see expansion of the market with another strong player in the fray,” he added. 

For Meera Iyer, Former Head of Marketing, Bigbasket.com, too RIL still has a long way to go.

“I am not sure Reliance has cracked retailing. It has not done great when you look at their projections on trends or jewels or fresh vs the actual,” said Iyer.

exchange4media reached out to Reliance, but could not get a comment till the filing of the story.

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