Two big-ticket news items hit the Indian market in the month of January. The New Year celebrations were over. Businesses had resumed chasing their monthly and quarterly targets. The clamour for votes in the political theatre had started to intensify—albeit gradually. People were also looking forward to the Interim Budget 2019-20, the last budget of the five-year term of the current government. Just then, a significant announcement took everyone by surprise: Reliance Industries supremo Mukesh Ambani announced that he would launch an e-commerce portal in India.
Even as no exact details of Reliance’s strategy behind the proposed e-commerce venture are available, considering the group’s track record of entering new businesses, it will create tough competition for global behemoths like Amazon, Flipkart, and eBay.
The gigantic OMO network
Being the ‘local’ alternative to the likes of Amazon and Flipkart, the new venture will create a hybrid online-mobile-offline (OMO) commerce platform. For one, the oil-to-mobile giant has its presence in India for several years and understands the local market realities better than any external player. The new venture will leverage the established business footprint of the group’s two companies, Reliance Retail and Reliance Jio, to build a hybrid OMO model.
While there are about ten thousand Reliance Retail showrooms in the country spread across 6,500 towns, as per TRAI’s latest, January 2019 figures, Reliance Jio Infocomm had 27.16 crore broadband subscribers in November 2018. In addition, the company has more than 5,000 Jio Point stores that the group intends to utilize to create the last mile access for its potential consumers. Technically, the group can leverage its massive OMO network of multi-crore customer touchpoints delivering an impressive advantage to its proposed e-commerce venture.
A victory for CAIT
The next big news came just before the Interim Union Budget 2019. The government announced that the new e-commerce policy would become effective on February 1, 2019, as scheduled.
Nearly for the past several years, the apex trade body, Confederation of Indian Traders (CAIT) along with Swadeshi Jagran Manch (SJM) had been lobbying for protection of the interest of small domestic traders—there are about 6.5 crore traders in India—against the onslaught of global e-commerce giants. The central government created a draft e-commerce policy in 2016 and revised it in December 2018 imposing a few restrictions on e-commerce players. The rules under the new policy are meant to protect small resellers in India.
For starters, as per these rules, e-commerce companies are not allowed to list and sell their own products or those from the companies they own a stake in. As per the rules, a seller that lists more than 25 per cent of its products on an e-commerce marketplace, would be deemed to be owned by the e-commerce company. The e-commerce giants including Flipkart and Amazon had been extensively lobbying to cancel or at least postpone the policy introduction. However, after duly considering all sides of the issue, the Department of Promotion of Industry and Internal Trade (DPIIT), Government of India decided not to postpone the policy introduction date and the new rules came into effect on February 1, 2019.
Besides being a victory for CAIT and SJM, the new policy will benefit the small traders as MNC e-commerce giants will need to stop selling their own products and be forced to collaborate with the local suppliers.
Advantage Reliance
While traders were up in arms against the e-commerce biggies like Flipkart and Amazon, incidentally, the mood in the trading fraternity looks upbeat about the proposed entry of Reliance in the fray. While Amazon and Flipkart have systematically damaged the competition from small retailers through deep discounting and by promoting their home-brands, traders hope that Reliance group would establish a symbiotic co-existence of its e-commerce platform and the domestic traders pointing to the continued existence of Jio store partners.
The proposed e-commerce venture from Reliance Group, as Mukesh Ambani has stated, aims at creating new business opportunities for several small and medium-sized companies in India, starting with those from the state of Gujarat. The winds of nationalism and protectionism indicate that in the upcoming battle of titans, the local player Reliance may just prove to be a formidable rival to the global e-commerce giants.