RIL’S Jiomart, Tata Digital gearing up for big fight

As Tata prepares its back-end, RIL’S e-commerce revenues expected to touch $15 billion by 2025

Jiomart, owned by Reliance Industries Ltd (RIL), is set to launch products in financial services and airline tickets to take on competition from upcoming rivals like the Tata Superapp and other established players including Paytm, Amazon, and Flipkart.

This comes at a time when RIL’S ecommerce revenues are set to grow 35 per cent to $15 billion within four years and its core retail revenues are expected to increase at the same pace to $44 billion, according to a forecast by Goldman Sachs.

“The Tata vs Jiomart war will be the next big corporate battle to watch. While Tata has an upper hand like in-house products and brands, RIL has the backing of global biggies like Google, Facebook, and Microsoft,” said the head of a rating firm.

“We forecast 50 per cent market share for RIL in online grocery by FY25, with 30 per cent market share in overall e-commerce. This translates into $35 billion ecommerce GMV (gross market value) for RIL by FY25, with $19 billion in grocery and rest by non-grocery. Overall, we expect retail EBITDA (earnings before interest, tax, depreciation and amortisation) to grow 10 times from current levels by FY30,” Goldman Sachs analysts led by Nikhil Bhandari said.

After growing five times between FY16 and FY20, analysts said RIL’S core retail revenue growth had taken a pause in FY21 due to the pandemic-related nationwide shutdown.

“We believe retail business including e-commerce is set to be the next growth engine for RIL, with potential for retail EBITDA (earnings before interest, tax, depreciation and amortisation) to grow 10 times over the next 10 years. We see a six-fold increase in grocery organised retail penetration in India by FY30, coupled with 15 per cent market share gain for RIL,” say analysts with Goldman Sachs.

A large part of this explosive growth will come from Reliance’s online delivery service, Jiomart, which is selling products ranging from groceries, clothes, pharmaceuticals, and personal/home care products.

Its rival, Tata Digital, a subsidiary of group holding company Tata Sons, has said it would be launching financial and travel-related products like airline tickets and hotel bookings.

Tata has strong brands like Tata Motors, Tata SIA Airlines, and Air Asia India, apart from Indian Hotels, the operators of the Taj group of hotels, which can sell its products on its Superapp. It also acquired companies like pharma chain, 1MG, and grocery retailer Big Basket.

Analysts said while Jiomart would do hotel bookings for companies like Oberoi Hotels, where it has invested, it is also in talks with airlines to sell tickets on their platform. “While Tata has several strong group companies which can sell their products on Tata Superapp, Jiomart will unleash competition, which is never seen before,” said a top executive of a multinational consumer products company.

RIL’S firepower will come from its foreign partners like Google, Facebook, and Microsoft, which have invested in Jio Platforms. Several products are expected to be launched in association with these in the coming months.

“Apart from these companies, several private equities (PES) have also invested in Jio Platforms, which is providing the digital backbone for Jiomart. These PES will bring in products from their own investee companies to launch products. Hence, it is a win-win deal for both,” said the head of a private equity major.

Besides, industry insiders said RIL would be getting an added advantage of private label products on Jiomart. They are priced 36 per cent lower than rival brands in personal care, 20 per cent lower in home care, and 20 per cent less than rivals in packaged foods and beverages.

Reliance Retail is the largest retailer in India by market share and a market leader in three of the largest retail categories -- food and groceries, electronics, and fashion & apparel -- which together represent 76 per cent of the retail market in India.

However, except electronics, organised retail still has a significant opportunity to gain share from the unorganised and fragmented market, especially in grocery and fashion, where RIL continues to focus on tier 2 and 3 cities where competition remains low.