Face Off: Mukesh Ambani Vs. Jeff Bezos?

Online/offline channel and sales are current hot topics. The unrest in the offline channel has been higher in the mobile phones’ sector since it is the most affected and why shouldn’t it be! Mobile phones are the single largest revenue generating category for e-tailers and therefore get their maximum attention and support. This topic became more sensitive in the last few months, more so before the festival period which saw online going very aggressive and offline suffering collateral damage. As I write this blog, hopefully the last “Big Sales” is underway.

There was a severe backlash from offline, with the government intervening through DIPP to put some restrictions on the e-tailers like #Flipkart and #Amazon which fall under FDI regulations. These have already been covered in my earlier blog <>. While the lobbying continues from both sides with CAIT and Swadeshi Jagran Manch on behalf of local traders fighting for no relaxations, Amazon and Flipkart have joined hands and are taking support of trade bodies like FICCI, CII, and other big investors like Softbank, Tiger Global, Sequoia and Naspers to relax the new directives.

While we wait for who wilts and how much, we have Mr. Mukesh Ambani announcing the entry of #Reliance in the e-commerce space. This will be defining India or should we say Bharat Inc. strategy in 2019 and onwards. The new policy on e-tailers covered under FDI will make this strategy more potent.

Gujarat would be the first state where the new e-commerce project would kick-off. Through this project #Jio and Reliance Retail would empower 12 lakh shopkeepers in Gujarat. Post Gujarat, the project will get rolled out nationally. "We see our biggest growth in creating a hybrid, online-to-offline new commerce platform of 35 crore customer footfalls at Reliance Retail, 21.5 crore Jio customers, 5 crore Jio giga-home customers, and 3 crore small merchants and shopkeepers," quotes Mr. Ambani at the vibrant Gujarat Summit last week. This means most of the things and services you buy in future may have a Reliance imprint. This move for sure will disrupt the country’s Rs.2 lakh crore e-commerce market.

While full details on how Reliance’s e-commerce arm will function are yet to be revealed, it will be very different from Amazon’s and Flipkart’s. Instead of holding inventory, Reliance will most likely use existing inventory that’s held with small and medium shopkeepers, and leverage the reach of its 10,000 odd network dotted around the country across 5000 cities, to somehow get it delivered to customers in their homes. Reliance has a sizable retail presence of its own — Reliance Retail, Reliance Trends, Reliance Fresh, Jio Stores and the likes, and is the biggest organised retailer in India. It is possible that Reliance uses this inventory as well for its e-commerce arm.

Going back to the AGM speech by Mr. Mukesh Ambani in July where he did touch this topic, the retailers who make use of the platform will be able to manage inventory, keep digital records, file returns, improve working capital management, access new customers, run promotion and loyalty programmes. There would be ample use of Augmented Reality (AR), holographs and Virtual Reality (VR) devices to create an “immersive shopping experience” for the customer. Reliance will also support the small retailers with availability of financing – a much required instrument for growth. Digital tools will be used to predict and anticipate needs of shoppers. 

It’s not that Reliance is new to e-commerce. It does have a Reliance Digital website delivering electronic goods to customers around the country, but this initiative is likely to be much larger, and could pose a challenge to incumbents like Flipkart and Amazon. Reliance doesn’t usually enter industries if it doesn’t intend to dominate them — it entered telecom with Jio, and ended up shaking the entire sector and the players; it entered fiber broadband, and spent hundreds of crores to acquire Hathway and DEN Networks. 

“In this new world, data is the new oil. Data is the new wealth. India’s data must be controlled and owned by Indian people and not by corporates, especially global corporations,” Mr. Ambani said at the #VibrantGujaratSummit. “For India to succeed in this data-driven revolution, we will have to migrate the control and ownership of Indian data back to India, in other words, Indian wealth back to every Indian,” he added. 

It seems Mr. Mukesh Ambani, Asia’s richest man, is ready to take on the Flipkarts and the Amazons. And he does have the weapons – a combination of Jio telecom service, mobile devices and a vast physical retail network. The online-to-offline platform will probably be launched in twelve to eighteen months across the country, according to people familiar with the matter, said a #Bloomberg report. This is a part of Mr. Ambani’s larger plan to achieve his reported aim to generate half of the group’s revenues  from consumer businesses over the next 10 years.

This would mean more trouble for the big e-tailers who work on the traditional online model as it will be a profitable venture with no discounting by Reliance.  To set the perspective right, the existing online players have grown basis discounts, burning close to Rs.50,000 crore in capital from discounts and infrastructure.

“Reliance seems to be creating next generation retail network which has the potential to radically change the dynamics of retail in a fast growing economy”, Investment guru and former Infosys CFO T V Mohandas Pai said, adding that "it would dramatically lower costs, reduce inefficiencies in supply chain, reduce waste and deliver better. This will immensely benefit consumers."

Reliance is truly a formidable competitor as it has capital, technology, networks, physical retail presence, a long term vision and the passion to win, he said.

Reliance's next generation retail network is powered by a robust fiber network with an efficient supply-chain giving consumers an online offline experience of their choice.

Pai noted that exciting times were ahead with the entry of Reliance into the e-commerce space as the existing online players have grown on customer discounts.

What impact will Reliance’s entry with this O2O model have on online seems to be clear. It will surely add to their woes if DIPP does not change its stance which as per a newspaper article today is highly unlikely. The situation for them is expected to go from bad to worse as Reliance is known to enter a space only if it knows it can dominate it.

However what impact it will have on offline, is yet to be seen. I guess it will take some time to have full clarity on the execution part which will determine the positive or negative impact, if any on offline.

So we are looking at 6 possible channels – offline, online, O2O, organised retail, brands stores, social media (more on this in my future blogs) – very soon. To be honest, it will not be a question of either or all, but co-existence of some or all. What share each of them will take will depend on how things pan out and how brands want to play. It may be different for different brands. 

It’s Game on!

*Quote and data Source if not mentioned: The Economic Times, Livemint, Bloomberg