[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.]
By
Joanna Slater
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A
poster of India’s richest man and oil-to-telecom conglomerate Reliance
Industries
chairman
Mukesh Ambani. (Indranil Mukherjee/AFP/Getty Images)
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MUMBAI
— 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.”
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.
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 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 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.
Payal Mohta contributed reporting.
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