RELIANCE TO DO A ‘JIO’ IN RETAIL?

about 1 month ago
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Is Reliance going to do a Jio in the e-commerce sector?

That’s the big question plaguing giants like Amazon and Flipkart, which is more Walmart now.

The sheer destruction which Jio wrecked on the Indian telecom sector is here for all to see, with existing players looking like wounded and maimed soldiers on the battlefield; the huge army of Jio came and conquered and the existing warriors could do nothing but watch their kingdom slip away. That’s the power of money and Ambani has more.

That’s the fear which e-commerce is facing. Reliance Retail when it hits, with all the muscle of money power, will change the complete scene.

The recent restructuring done by Reliance was a brilliant move. By setting up a $24 billion digital services holding company, Reliance has made its move to dominate the ecommerce shopping in India. But mind you, this is not limited to merely online shopping; what Reliance will bring in is a platform which will hold retail, e-payments, entertainment, social media platforms and so much more. So what Reliance is trying to do is gain dominance at every point of consumption – retail, telecom and entertainment.

In the USA, it is Amazon which pretty much dominates and in China, it is Alibaba. Here, currently we will have a battle royale between Reliance, Amazon  and Walmart. Well, Reliance has 11,000 stores across 6,700 cities and towns, encompassing an area of 23 million sq.ft. 25 lakh kirana stores have PoS machines. It also has the largest telecom presence through Jio, with 348 million subscribers. On the entertainment front, it has stakes in Viacom and Network 18. It has already acquired DEN and Hathway Cables. It has stakes in Balaji Telefilms and Eros Now.

And that’s what Alibaba and Amazon too do – dominance at every point of consumption. Alibaba has a 70% market shares in ecommerce in China, it makes films, its wallet, AliPay is an over $40 billion entity and has its own ecosystem of Google, Facebook and WhatsApp.

Amazon is huge too. Amazon Prime is a household name across the world. Its Prime Radio is a big hit and Amazon Pay is catching up fast. It also owns a brick-and-mortar physical grocery retail company, Whole Foods. In India, it has stakes in Future Group, Shoppers Stop and More. It is also going aggressively on the kirana stores option, partnering with some 23,000 to become the last mile delivery point. The idea is to ultimately use these stores to sell their own private brands and labels of grocery, apparels, electronics and et al.

In India, it will essentially be a battle between Reliance and Amazon because in terms of scale, their economies match. But all three- Reliance, Amazon and Walmart have very deep pockets; lets see who wins.

The question is not whether Reliance will conquer this segment too as it’s a rhetorical. The question to be asked is whether it is good to have a monopolistic player dominating. Ambani has the capital and the resources to dominate; nothing wrong with that as this is a free market and whoever grabs more market, wins. That’s fair play. But what would not be fair is when rules and policies get tweaked to allow this dominance to emerge. It has to remain a level playing field. Will that happen? That is the biggest worry.

Remember competition is always good as it forces one to do his/her best. But if you have a monopoly, it will make one complacent and we will have to eventually settle for mediocrity. Consolidation to the point of monopoly has never served the consumer- ever.

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