Sagar Malviya, The Economic Times
Mumbai, 5 March 2015
Reliance Industries (RIL) has sought shareholders’ approval to make major forays into the online retail space to cash in on the boom in the country’s e-commerce market that is expected to grow four-fold to almost $70 billion by 2019.
The Mukesh Ambani-run firm included a clause of "operating, establishing, providing and managing e-commerce and m-commerce websites, direct-to-home and mail order services for all categories of products and services, and dealing in all kinds of goods, materials and items in India or in any other part of the world" in a recent notice to its shareholders.
A Reliance Industries spokesman said the activities are closely related to the firm’s initiatives in retailing and digital services which are being implemented through substantial subsidiaries. "This will facilitate creation of value for Reliance shareholders by expanding the scope and breadth of offerings from these two businesses," he said.
The move is part of company chairman Mukesh Ambani’s wider strategy of placing its telecom venture Reliance Jio Infocomm, which is set to launch its 4G mobile and data services this year, at the intersection of "telecom, web and digital commerce" as he mentioned at the company’s AGM last month.
It comes at a time when e-commerce business is growing at a rapid pace in India, with players such as Flipkart, Amazon and Snapdeal luring Indian consumers by offering heavy discounts across products.
According to a joint report by Boston Consulting Group and Retailers Association of India, e-commerce market in the country is expected to quadruple to $60-70 billion, or about 3,72,000-4,34,000 crore, over the next five years. Increasing Internet access through affordable smartphones and efforts by online retailers to develop payment channels such as cash on delivery, mobile wallets and streamlined logistics infrastructure are expected to boost e-commerce growth in the country.
To shore up its nascent e-commerce business, Reliance is expected to reshuffle jobs within the group and not necessarily bring all outsiders. Recently, the group moved Anupama Ahluwalia from Reliance Jio into an expanded role in its retail arm Reliance Retail as chief marketing officer.
At present, Reliance Retail’s online presence is restricted to Reliance Fresh Direct that sells fruits and vegetables and home and personal care products through a virtual store. The company – which operates 2,285 stores across fashion, lifestyle, digital and food segment – dislodged Future Group as the country’s largest retailer by revenues earlier this year.
Experts say its deep pockets and existing retail logistics infrastructure will help Reliance in the e-commerce space.
"While online is a potentially large market, whether Reliance entry could be disruptive is still a question," said Devangshu Dutta, chief executive at retail consultancy Third Eyesight. "The e-commerce sector itself is getting cautious in spending money on marketing and discounting. While the stakes and capital requirement has increased, Reliance has an advantage of having a deep pocket," he said.
Though many retailers in India are struggling with falling store traffic as shoppers make more purchases online, food and grocery retailing still remains predominately insulated.
Yet, several retailers including Future Group and Aditya Birla Retail have either entered or plan to enter e-commerce space, especially when their stores network and warehouse could come handy to cut logistics costs and delivery time.
(Published in The Economic Times.)