HOW INDIAS RICHEST MAN PLANS TO TAKE ON AMAZON AND WALMART 1
Mukesh Ambanis next gambit may be his most audacious yet - and it will put him on a collision course with Amazon and Walmart
He is the richest man in Asia, an industrialist who built an energy giant, launched a nationwide telecom network and lives in his very own skyscraper.
But Mukesh Ambani's next gambit may be his most audacious yet - and it will put him on a collision course with Amazon and Walmart in the battle to dominate e-commerce as hundreds of millions of Indians begin shopping online.
Digital purchases are growing rapidly in India and could hit $200 billion in the next seven years, according to a recent report by Deloitte. Unlike China, where homegrown players like Alibaba have cornered the e-commerce market, the future of online shopping in India remains up for grabs.
Enter Ambani. His Reliance Industries is India's largest company, an oil-to-entertainment conglomerate that is evolving into a firm focused on Indian consumers. Three years ago, Ambani started a telecom network whose cut-rate, data-heavy plans revolutionized the Indian internet.
Ambani is hoping to achieve something similarly disruptive in e-commerce. Reliance aims to "completely transform" the millions of individual merchants and modest shops that still make up about 90 percent of the country's retail market, Ambani told investors last month. He pledged to turn even the smallest mom-and-pop shop into a "future-ready digitized store."
Digital purchases are growing rapidly in India and could hit $200 billion in the next seven years, according to a recent report by Deloitte
Sonu Singh, 25, who runs a tiny drugstore and pharmacy in a Mumbai suburb, doesn't know it yet but he is part of Ambani's grand plan. For the past three months, as part of a pilot project, he has used a Reliance-provided device that can swipe credit and debit cards, manage inventory, process rebates and accept inventory orders. The company also told him it is planning to open a large warehouse nearby that can deliver supplies to him within hours.
A Reliance spokesman declined to respond to questions about the firm's e-commerce strategy, and company executives turned down interview requests. Aside from Ambani's brief remarks at the company's annual meeting, Reliance has been tight-lipped about its e-commerce plans.
In the absence of verified information, rumors have flourished, including that Reliance is planning some kind of high-profile launch around Diwali, a major festival that will take place this year in October (for Indian retailers, Diwali is the equivalent of the Christmas shopping season in the United States). Reliance declined to say if any kind of launch is planned for later this year.
Amazon and Walmart are watching closely. Analysts say that India, home to more than 1.3 billion people, is a crucial market for both firms. Incomes are rising, smartphone usage is spreading and the shift toward large-scale, organized retailing has only begun.
Last year, Walmart invested $16 billion - its largest purchase ever - to acquire Flipkart, a leading Indian e-commerce platform. Amazon has committed more than $5 billion to its Indian operations and recently announced a deal to buy a small indirect stake in Future Retail, one of India's largest brick-and-mortar retailers. (Amazon founder and chief executive Jeff Bezos owns The Washington Post.)
"It's early days for e-commerce in India with several companies pursuing different strategies, and this competition is good for customers," said an Amazon spokeswoman in response to questions about Reliance's push into online shopping.
Incomes are rising, smartphone usage is spreading and the shift toward large-scale, organized retailing has only begun across small towns in India
Walmart echoed the sentiment. "India is a big market and there should be opportunity for many retailers to grow in the years to come," a company spokeswoman said.
Amazon and Walmart "have to take Reliance extremely seriously," said Abneesh Roy, a retail analyst at Edelweiss Securities in Mumbai. Reliance is "one of the top two players wherever they have entered. They understand the Indian consumer and they understand Indian regulations."
Lately Ambani, 62, has struck an explicitly nationalist tone in public. He has called data "the new oil" and warned that global corporations should not control Indians' information. "Data colonization is as bad as previous forms of colonization," he said late last year.
Such views mesh well with the outlook of Prime Minister Narendra Modi's government, which dislikes the idea of foreign companies dominating Indian e-commerce. An abrupt rule change earlier this year forced Amazon to restructure the way it did business in India. A draft version of a new government policy for e-commerce sounded a cautionary note about the "handful of companies" that "dominate the digital economy."
Reliance's potential competitors say there is room for multiple players. E-commerce in India is "like a galaxy expanding," said an Indian executive who spoke on the condition of anonymity because he was not authorized to discuss the matter. "Everyone has a role to play, we just want to make sure it's equal treatment."
Reliance is doing a "fabulous job of keeping everyone guessing," said another industry executive who also spoke on the condition of anonymity. The biggest concern is "their potential to intervene in regulatory matters."
Reliance, which was founded by Ambani's father Dhirubhai, has a reputation for influencing policy in its favor. "The speed dial facility which they have is a unique one," said Arvind Singhal, chairman of retail consultancy Technopak, referring to Reliance's ability to reach into the highest levels of Indian politics and policymaking. That still represents "a big advantage."
In the near term, Reliance, Amazon and Walmart all must contend with a slowing Indian economy. But Reliance has considerable assets over the long run, Singhal said. It is already a major offline retailer, with chains of clothing stores, groceries and gas stations. It has its own telecom network with more than 340 million customers. It also owns television channels and has announced a joint venture to produce movies'
Thanks to the spread of smartphone usage in India, there is a "huge undercurrent" of young users that will translate into an explosion in online shopping for goods and services within a few years, Singhal said. "There is only one company's that is completely ready for that and that is Reliance," he said;
For now at least, Reliance's ambition to transform small traders into the foot soldiers of its e-commerce empire looks more tentative than revolutionary. On a recent morning, not far from the blue and green glass towers of Reliance's corporate office's park in Navi Mumbai, a bustling market street was open for business in a monsoon downpour.
At Gayatri General Stores, Bhavesh Patel, 44, and his son Yash, 23, stood at their decade-old business, a small general store selling snacks, dry goods and toiletries. Strips of plastic sachets of shampoo dangled from the ceiling,.
A few months ago, a Reliance representative offered Patel a free point-of-sale device (there was a $40 deposit, but no transaction charges). It was the first time the shop has ever accepted card payments. For now, however, the proprietors only use it for that limited purpose.<>
Nearby, several other mom-and-pop shops - a ubiquitous feature of Indian retailing known as kirana stores, which often sell rice, grains, oils and packaged foods - were also trying out the Reliance devices, which look like large cellphones mounted on a base:
The only one to use the device for anything beyond card payments was Sonu Singh, who opened his own small drugstore a little over a year ago. Singh says Reliance sends discount codes to its cellphone customers via an app, which he can then scan to complete the promotion, boosting sales and obtaining a small rebate. "For me, it's good, no?" he said with a smile. Then he turned back to the counter, where the next customer was waiting.