E-commerce in India is only a small fraction of the entire retail sector, leaving room for changeover and growth, especially with the enablement of offline retail.
Reliance Industries Chairman Mukesh Ambani had been teasing the company’s grand plans for ‘new commerce’ for years now, touted as the next big e-commerce disruptor. Taking the stage at Reliance’s annual shareholder meeting on Wednesday, Ambani made two very important announcements. One was that Reliance Retail was receiving global investor interest. The other: JioMart would be expanded beyond grocery.
With a massive offline presence, Reliance Retail is already the country’s largest retailer. With global investors giving it the financial muscle and an aggressive focus on expanding its offline-to-online model, Reliance Retail, specifically JioMart, could threaten the kind of position that Amazon and Walmart’s Flipkart enjoy in India.
At the AGM, Ambani announced that JioMart will expand to cover electronics, fashion, pharmaceutical and healthcare in the coming days. These are sectors that Reliance already has a foothold in offline through Reliance Retail that it could ultimately leverage.
Amazon India and Walmart’s Flipkart both have a wide reach and deep pockets and have been aggressive in maintaining a hold over India’s e-commerce market. Though nascent, the Indian e-commerce market is largely dominated by these two players. Every other competitor — Snapdeal, Paytm Mall, Shopclues — has failed to achieve the same scale that these two have.
JioMart, however, could change the game since it has what others lacked: the financial muscle, a history of aggressive market expansion and a strong offline backing.
Devangshu Dutta, founder of consulting firm Third Eyesight, points out that Reliance is not an underdog. “As a company, whenever it (Reliance) has seen a sector as strategic, it has very aggressively built its presence — whether its telecom or retail. And JioMart is seen as strategic. He (Ambani) made a very clear statement on that — they will invest in it aggressively and build scale in it,” he adds.
After Jio Platforms raised over Rs 1.5 lakh crore from various global investors, including Google and Facebook, Ambani said at the AGM that Reliance Retail is now receiving ‘strong interest’ from strategic and financial investors.
“Today, the world recognises our hyper-growth inclusive model. We have received strong interest from strategic and financial investors in Reliance Retail. We will induct global partners and investors in Reliance Retail in the next few quarters. I will keep you informed about the progress of Reliance Retail, which is at the doorsteps of continued exponential growth,” Ambani said.
Satish Meena, a senior forecast analyst at Forrester Research, says that this kind of capital is required to take on Amazon and Flipkart. “They are not even thinking about competing with the Indians in the retail sector, they are thinking ahead of it,” Satish says.
According to Satish, global investors may be interested in the retail sector as well.
“India is a market where global retailers or investors are looking for access for a longer period of time. After the US and China, this is the biggest market in terms of retail opportunity. They don’t want to miss out. Most US companies have already missed out on the Chinese market,” he observes.
Satish adds that India provides a future opportunity, and the companies which are investing will be looking at the next 10 to 20 years, will need market access, and retail is a big opportunity.
“For that, they also need someone who can do things on the ground at scale. That’s something no one does better than Mukesh Ambani because he has done it three times — Reliance Industries, Reliance Retail and now Jio. They are betting on these two things — access to the market and someone who can aggregate things on the ground and make their investments multifold in some years,” he says.
But according to Ankur, it may become impossible to isolate Reliance Retail (with JioMart) and Jio Platforms, as Reliance’s retail play will most likely get plugged into its digital business in one way or another, unless they are portrayed as entirely different.
So should Amazon and Flipkart (And Walmart) be worried?/
Devangshu says that e-commerce in India is only a small fraction of the total retail sector, and that there is room for changeover and growth, especially with the enablement of offline retailers. Devangshu believes that there is room for an equally big third player in the e-commerce segment.
Similarly, Ankur Bisen, Senior Vice President at Technopak, says that modern retail (including e-commerce) constitutes just 12% of the entire retail industry, with the rest being traditional, and says that the market isn’t saturated enough that one player will eat into the other.
Looking at grocery alone (as JioMart currently stands), Satish says that JioMart, with the power of pricing that Reliance has, can push through as they can give customers the most savings when it comes to grocery purchases.
And this pricing power has worked for Reliance previously in disrupting sectors, the latest of which was with telecom network Jio. Reliance entered the market with the cheapest data plans, triggering consolidation in the market and leading to other telecom players struggling financially. It is now the largest telecom player in the country with about 34% market share.
Reliance’s other asset is the offline retail presence it has built. “The biggest players in online grocery are Big Basket and Grofers, and Reliance already has a backup of offline assets. That’s a strength which Reliance is going to play on and they will fight it out with these companies in grocery, and might have some advantage,” Satish says.
Apart from Reliance Retail’s wide network of stores, Reliance also has Reliance Brands, which has several luxury brands and can be used to cater to customers online.
Ambani said that JioMart, which rolled out in 200 cities across the country, clocks 2.5 lakh orders a day — the kind of order numbers established e-grocers like Big Basket get.
Even Amazon has not been able to make a dent and Flipkart has made a recent foray with Supermart. But the pandemic, backed by various surveys, has shown that Indian customers are not moving away from their kirana stores. And kirana stores are what JioMart is looking to leverage.
For JioMart, its biggest USP may come when it integrates it with WhatsApp to tie the local kirana store to the consumer on a platform that is already widely used, and the consumer is very familiar with.
But as Satish points out, consumer experience is important to the success of an online platform — where a customer gets the exact same experience each time they shop on the site.
For JioMart, things did not get off to a smooth start, with numerous complaints of bad quality vegetables, undelivered orders and pending refunds. And while JioMart may have the scale, bandwidth as well as the inventory, bad experiences will drive customers away.
How the retail industry will shape up
The retail industry is set to see a new trajectory of growth, one that is spurred by consolidation and a digital play.
Devangshu from Third Eyesight says, “We are a very large population and most of the population buys through traditional retailers, so there is a lot of headroom to grow for modern retailers. Modern retail is not only corporate players but also smaller chains which are family-owned businesses in smaller towns, which are growing.”
With the COVID-19 pandemic further strengthening the case for online retail, Ankur says that the debate between offline and online retail will diminish, and modern retail will become more of a digital play — where there will be physical as well as digital presence, and digital will drive growth.
This is already being seen with kirana stores too showing the intent to go digital. Walk-ins into retail stores have significantly reduced amid fear of infection. Currently, there is massive demand for online retail, not just for e-commerce the way we have been seeing it so far. There is also demand for essential items at home that were otherwise bought from supermarkets and neighbourhood stores.
Food will become an important driver for retail which it wasn’t before COVID-19, Ankur adds.
Written By Devika Singh
Start-ups such as HipBar, Drinkify and Liqhub tried their hands at alcohol delivery in the past, but hit regulatory hurdles
Zomato, for instance, has a total of 250 retailers on board so far, and has plans to partner with all the authorised government retailers in the cities where it is active.
Alcohol delivery is emerging as the next big thing in India’s e-commerce scene. BigBasket and Amazon recently acquired licences for delivering alcohol in West Bengal. Food aggregators Swiggy and Zomato are already offering alcohol delivery services in Jharkhand, Odisha and West Bengal.
This could be a lucrative business for e-commerce companies as several states continue to be under lockdown and consumers are wary of visiting liquor stores to buy alcohol, given the risks involved. Start-ups such as HipBar, Drinkify and Liqhub tried their hands at alcohol delivery in the past, but hit regulatory hurdles.
However, in view of the huge losses incurred by state governments during the lockdown — according to a report by the Reserve Bank of India, on average, Indian states collected Rs 15,000 crore per month as excise duty on alcohol in 2019-20 — regulations have been eased. This has attracted interest among several e-commerce companies eyeing the alcohol business in India, which Statista estimates is valued at Rs 2.4 lakh crore.
Prepping the tech
E-commerce firms venturing into this space are busy developing technology for age verification, which is critical from a regulatory compliance standpoint. Zomato has adopted a two-step verification process for ascertaining the age of the user, while Swiggy has developed an AI-based face recognition feature with OTP to automate age verification and user authentication.
“We have mandated a one-time instant age verification followed by a selfie of the customer. The integrated solution instantly digitises the customer’s identity card, checks if the customer’s selfie matches with the picture on the card, and then checks if the customer is really present in it or if it is a photo of a photo,” says a Swiggy spokesperson. The company has also introduced a crowd control feature for the safety of its delivery partners, which ensures there is no overcrowding at the retail stores during peak hours.
These companies are tying up with authorised retailers in specific cities for delivery. Zomato, for instance, has a total of 250 retailers on board so far, and has plans to partner with all the authorised government retailers in the cities where it is active.
Although these e-commerce players are in talks with other states to scale up their services, at the moment, their focus is on getting the processes right. “Alcohol delivery is complex, involving multiple stakeholders — governments, retailers, and brands — and strict operating guidelines. These are early days and it faces challenges typical to any new category, such as technology adoption by suppliers, stock availability, etc,” says Rakesh Ranjan, VP – Zomato.
Devangshu Dutta, chief executive, Third Eyesight, says following the diverse regulatory guidelines will not be easy for these companies. “Since every state has its own set of rules, adhering to them will be challenging for the companies entering this space, especially when they are eyeing pan-India operations.”
Zomato and Swiggy, on average, are charging Rs 60-100 per order for delivery, depending on the order size and distance covered. The Odisha government has fixed the delivery fee at Rs 100 for orders up to Rs 1,000, and beyond that for every Rs 500, charges go up by Rs 25, with a ceiling of Rs 300 on delivery charges.
Ankur Pahwa, partner and national leader – e-commerce and consumer internet, EY India, says a “reasonable” delivery fee is critical in the adoption of this service. “A customer buying 10 bottles of beer would not mind shelling out Rs 100 as delivery fee, but someone buying one or two products may not want to spend as much on delivery.”
He foresees that food aggregators would benefit from the impulse purchases, while grocery players would see planned orders coming their way, when customers are looking at stocking up for the month.
Rajat Wahi, partner, Deloitte India, says that these companies could expand into alcohol distribution going ahead, which, so far, has been tightly controlled by the states. “Currently, there are only 86,000 alcohol stores in the country, as compared to 10-12 million FMCG retailers. Distribution is the bigger play here,” he adds.
Written By Peerzada Abrar
The companies said this investment builds on the long-standing engagement between the two organisations that have been working together for several years
Arvind Fashions has a portfolio of renowned brands, both international and indigenous
The Flipkart Group has invested Rs 260 crore for a significant minority stake in retailer Arvind Fashions’ (AFL) recently formed subsidiary Arvind Youth Brands, which owns the Flying Machine brand. The companies said this investment builds on the long-standing engagement between the two organisations that have been working together for several years to address the demands and needs of the fashion-conscious youth in India.
An Indian brand with a 40-year legacy, Flying Machine has been retailing on the Flipkart Group platforms of Flipkart and Myntra for more than 6 years. With its brand legacy, design sensibilities and youth appeal, Flipkart said the brand is seen as a strong style partner across metros and smaller towns. Through this investment, the Flipkart Group and Arvind Fashions will work collaboratively to identify opportunities and synergies to innovate and develop products with strong value propositions at attractive price points.
“Flying Machine is a brand that is known in households across India, popular with the youth and synonymous with value and style,” said Kalyan Krishnamurthy, chief executive officer, Flipkart Group. “Through this investment, we look forward to partnering with the team at Arvind Youth Brands to continue to grow the market for its portfolio of products and enhance the strong brand equity that has been built over the last few decades,” he said.
Arvind Fashions has a portfolio of renowned brands, both international and indigenous. Some of these brands include US Polo Assn., Arrow, GAP, Tommy Hilfiger and Calvin Klein. It is also India’s leading beauty retailer in partnership with Sephora. It owns and runs the value fashion retail chain, Unlimited.
“The partnership with the Flipkart Group will help us accelerate our online growth strategy as we focus our efforts on developing an omni-channel retail approach for Arvind Youth Brands and Flying Machine,” said J Suresh, managing director and CEO of Arvind Fashions. He said the company would continue to grow its offline sales through channels like exclusive brand stores, department stores and multi-brand stores.
Devangshu Dutta, CEO of retail consultancy Third Eyesight said this was a good time for any company that had the cash to pick up assets and the new investment would help Flipkart in the value-oriented segment.
“There are about 300 odd brands which have come into the country, but those are (mainly) restricted to the larger cities. When you look at the bulk of the market in terms of just sheer numbers and where the growth potential is, it is in the smaller cities and for targeting those you need a set of brands which actually fit the pocket,” said Dutta. “Flying Machine is one of the oldest and surviving denim brands in the country. It is a brand which fits well with the Indian consumer landscape. So in that sense, it is potentially a good asset (for Flipkart) to back and grow,” he said.
According to experts, fashion is a $100 billion market in the country with only 6 per cent having been penetrated by the online retail players. With the Covid-19 crisis and the lockdowns severely impacting businesses, experts said an increasing number of retailers, local shops and brands were now looking at e-commerce to jumpstart and scale their business. The pandemic has caused consumers to form new online buying habits and get the products home-delivered via e-commerce platforms to minimise exposure to the virus.
Written By Sankalp Phartiyal
NEW DELHI (Reuters) – E-commerce companies in India like Amazon.com’s local unit and Walmart’s Flipkart have begun to update their back-end systems to allow sellers to identify the country of origin on all new product listings on their platforms, two sources aware of the matter said on Wednesday.
The Indian trade ministry’s Department for Promotion of Industry and Internal Trade (DPIIT), which hosted an online meeting of e-commerce players on Wednesday, wanted the changes to be implemented by the end of July.
The companies, however, said they would need two to three months, according to the sources, who asked not to be named as the discussions were private.
The changes would first be made for new product listings as it was difficult to do this for the tens of millions of products already selling on their platforms, they added.
Amazon, Flipkart and DPIIT did not respond to requests for comment.
The government push to have e-commerce companies name the country of origin beside product listings comes against the backdrop of tensions between India and China following a border skirmish in June that left 20 Indian soldiers dead.
Trader groups have since called for a boycott of Chinese-made products and echoed Prime Minister Narendra Modi’s call for a self-reliant nation. New Delhi has banned 59 Chinese origin apps, and Chinese goods in ports have also faced extra scrutiny and delays.
“In the current context, there is an anti-China sentiment so if there is labelling, it could potentially influence purchases,” said Devangshu Dutta, head of retail consultancy firm Third Eyesight.
E-tailers have previously asked the government to clarify the definition of “country of origin”, which they say remains vague with some products assembled in countries including India but with their components or raw materials sourced from another nation.
On Wednesday, the government said it would discuss the matter internally, according to the sources.