Reliance e-commerce to swallow everyone?

The announcement by Reliance Industries Limited to enter the e-commerce fray has jolted the burgeoning market in India and its nascent start-ups.

“Reliance is working on creating the world’s largest online-to-offline New Commerce Platform,” said Mukesh Ambani, Chairman and Managing Director, Reliance Industries at the “Make in Odisha” conclave in November last year. With a wide footprint in over 10,000 Reliance Retail outlets panIndia, Reliance has a definite edge over all other retails players in the country. “Reliance has capital, an unending capacity to scale up, massive retail footprint and resources to beat the competition. Mukesh Ambani aims to become the top retail player in the country and can easily do that like he has done with Reliance Jio,” Satish Meena, senior forecast analyst at Forrester Research, told IANS.

One thing that has always worked in Reliance’s favour is their deep discounting strategy and this will be the key differentiator with their e-commerce platform too.

Thomas George, senior vice president and head of Cyber Media Research (CMR), said: “I will not be surprised if Paytm could be an acquisition target for Reliance or Alibaba to pursue their India e-commerce business opportunity.” Alibaba never saw long-term growth in the e-commerce sector in India so they placed their bet on the burgeoning digital payments sector which, according to Google and Boston Consulting Group, will be worth USD500 billion by 2020.

Paytm founder and CEO Vijay Shekhar Sharma, who had Alibaba invest in his company, thought otherwise.

“Reliance is looking at toppling Amazon and Walmart-Flipkart from their top positions. Paytm Mall is just a small competitor in comparison,” said Meena.

When Paytm Mall started, it took a cue from its Chinese investor Alibaba and aimed to become a digital universe for everything. As part of its initial offers, the company started giving cashback to attract customers.

According to Pavel Naiya, senior analyst, Devices and Ecosystem, at Counterpoint Research, it was a short-term strategy and gaining royalty in the long-term in a pricesensitive market like India was an uphill task which depended on multiple factors, including service delivery, exclusive offerings and additional product bundling.

“As cashback disappeared, so did the customers,” said Naiya.

Paytm Mall stopped fighting the lowmargin, high cash burn e-commerce battle, and began altering its strategy to become an O2O (online to offline) platform for small sellers.