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$150bn e-commerce market: Potent mix of retail, telecom, digital media to put Reliance at top

In a new report, Bernstein Research said India is evolving into a three-player market with Amazon, Walmart and Reliance

New Delhi: Billionaire Mukesh Ambani’s Reliance is the best-positioned player in the USD 150-billion Indian e-commerce market ahead of Amazon and Walmart due to its owning the potent combination of largest retail store network, dominant telecom operations and strong digital media, an analyst said.

In a new report, Bernstein Research said India is evolving into a three-player market with Amazon, Walmart and Reliance.

The conventional retail business model starts out either offline (Walmart) or online (Amazon).

“Given distribution challenges and India’s propensity to ‘skip a generation’ in most technologies, we believe the Indian e-commerce market will be different. An integrated model (offline plus online plus prime), strong distribution capability and superior cost advantage (against online players) are required from the start,” it said.

Reliance Industries is building the largest digital ecosystem in India. Its telecom arm Jio has 430 million mobile subscribers, its retail arm has 18,300 retail stores in India ($30 billion in sales), and its digital mix is scaling up 17-18 per cent ($6 billion, e-commerce).

“It’s a disruptive playbook — integrate offline + online + prime makes it the strongest competitor to Amazon/Walmart,” Bernstein said.

Reliance has 400,000-plus people in its retail business. It has, since January this year, hired about 69,000 new employees to replenish turnaround (about 66,500 employees exited the company). The turnaround in the company is lower than the 30-40 per cent annual churn seen in organised retail in the country.

It has also laid off some purely on performance-related issues. Close to 570 have been handed pink slips after failing to improve performance and serving notice period post-April 2023.

The sacking because of performance-related issues is less than 0.14 per cent of the entire workforce.

India is one of the few large and under-penetrated e-commerce markets. The market is expected to reach $150 billion by 2025, with online penetration doubling in the next 5 years. Flipkart ($23 billion gross merchandise value or GMV) and Amazon ($18-20 billion GMV) lead on scale with about 60 per cent market share. Reliance is No. 3 ($5.7 billion e-commerce sales) driven by attractive categories of fashion (Ajio) and JioMart (e-grocery).

All three players are focused on — Get Big (scale), Get Close (customer loyalty) and Get Fit (profitability).

“We believe Reliance Retail/Jio is the best-positioned player in the largest and fastest-growing e-commerce market. The advantages of its retail network, mobile network, digital ecosystem and ‘home field advantage’ in a famously complex regulatory and operating environment mean in the long term, it will likely claim the lion’s share of the $150 billion-plus e-commerce marketplace,” it added.

The Indian economy despite some slowdowns continues to be one of the leading centres of growth. Consumption spending continues to accelerate. The 24 million affluent households (annual income of more than $15,000) in 2016 will become 50 million households by 2025. The large number of affluent households makes India a very attractive market.

Also, India has one of the lowest 4G data prices in the world ($0.25 per GB) and the highest per capita mobile data consumption in the world (8 GB a month). In all, 530 million people have access to the internet, making India the second-largest user base for the digital economy after China. The number of internet users in India is expected to grow to 1 billion by 2025 with 33 per cent of them (330 million) becoming online shoppers.

“Reliance Industries (RIL) has seen this coming. Since 2015, RIL has built: (1) Reliance Retail into an 18,000+ store nationwide chain with GMV of USD 30 billion, (2) a dominant 4G network (430 million subscribers) in Reliance Jio, and (3) a strong digital media platform OTT/IPL, music streaming, news through strategic acquisitions.

“This makes RIL the only Indian player to have an integrated (offline + online + prime) offering and the ability to compete with global tech giants (Amazon, Walmart),” the brokerage said.

The post $150bn e-commerce market: Potent mix of retail, telecom, digital media to put Reliance at top appeared first on India Retailing.



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