Will Reliance’s ecommerce gamble against Amazon, Flipkart pay back?
Backed by multi-billion-dollar investments from global tech giants, Reliance is preparing to rumble with Amazon and Walmart for the country’s huge ecommerce market.
But it is far from sure that Mukesh Ambani’s latest gamble can pay off in a crowded market where many suppliers aren't well-versed in digital business.
The mogul has long trumpeted his ambition to revolutionise retail in the country of just one 1.3 billion by convincing farmers and shopkeepers to market their goods on his new JioMart platform launched this season.
But modernising India’s creaky, inefficient supply chains will never be easy, even for Reliance, the nation’s largest retailer by revenue with a portfolio including supermarkets, electronics stores and fast-fashion outlets.
Google on Wednesday became the most recent Silicon Valley player to purchase the digital unit of the Indian oil-to-telecoms juggernaut, following in the footsteps of Facebook and Intel.
These votes of confidence notwithstanding, Ambani’s success will depend on India’s mom-and-pop stores and their capability to adapt to the demands of an internet business, analysts say.
Keeping bargain-hungry consumers satisfied in a fiercely contested market may be even harder.
Early signs have not been promising for JioMart since its roll-out in 200 Indian cities in-may.
Customers have complained about from rotting vegetables to missing deliveries and delayed refunds.
A devoted online shopper who buys electronics from Amazon and clothing from Walmart-owned retailer Myntra, Mehul Shah is the sort of customer much sought after by Ambani and his rivals.
The 22-year-old positioned his first JioMart order immediately after the platform’s hotly-anticipated launch.
“I wanted to see what it had been like... because there is so much hype around it,” he told AFP.
But fewer than half his items were delivered and mint leaves he ordered arrived rotten, forcing Shah to throw them away.
Money, money, money
Shah’s experience underlines the challenges facing Ambani as he attempts to defend myself against Amazon, BigBasket and Grofers, which established supply and delivery networks in India.
The 63-year-old tycoon will probably deploy the same strategy he used to create his Jio mobile service a market leader after its 2016 launch.
Jio’s cut-price discounts put phones in the hands of millions of first-time buyers in India, clobbering your competition and driving rivals out of the race.
In recent months Ambani has raised a lot more than $22 billion in a rights issue and through selling stakes in Reliance to foreign investors.
The conglomerate is currently net-debt-free and has cash to burn, analysts say.
“JioMart will use the money by offering deep discounting to get consumers, and is in it for the long haul,” said independent analyst Minakshi Ghosh.
But the firm may also need to pump funds into training local shopkeepers in online trading. Many say their businesses have already been badly hit by the rise of supermarkets and e-commerce.
“Even in my dreams I never imagined running such today's business... or obtaining card payments,” said Kavita Chowdhury, a shopkeeper in Navi Mumbai, a city neighbouring India’s financial capital.
Her partnership with JioMart cannot have come at an improved time for the 30-year-old, with the coronavirus pandemic forcing her to shutter the bricks-and-mortar store.
She can now sell online instead and business is booming, she told AFP.
‘Teething issues’
A Reliance source told AFP JioMart had received an “amazing” response from consumers.
“People in small towns are buying Del Monte olives and focaccia bread... They know about global trends and want more options,” he said.
But he acknowledged the business faced “teething issues” in logistics-problems which analysts believe could prove its Achilles heel.
“You need steady delivery models and client satisfaction” to run a successful e-commerce operation, Forrester Research senior forecast analyst Satish Meena told AFP.
Reliance won't “have a walkover just due to their financial strength”, he said.
Some customers have previously sworn off the platform.
Vamshi Krishna, 28, told AFP he would never again buy anything from JioMart after his first two orders went missing.
“Despite issues with my first order, I made a decision to give them a second chance... because it is an Ambani company,” he said.
“Now I seriously doubt whether I'll ever get my money back.
