EDITIONS
Opinion

Will the entry of Reliance as an ecommerce marketplace put profitability on the radar?

Suma Ramachandran
20th Jan 2019
Add to
Shares
37
Comments
Share This
Add to
Shares
37
Comments
Share

What will Reliance's entry into the ecommerce marketplace arena mean for Flipkart and Amazon?

Reliance, Mukesh Ambani
Reliance Chairman Mukesh Ambani

For as long as I can remember, the front-page newspaper ads from Flipkart and Amazon and other online retailers have clearly focused on discounts. The bigger the discount, the bigger the size of the product image.

Today, the front page of a leading daily was different. It was an ad for yet another edition of Amazon's Great Indian Sale. But there wasn't a single product photo in sight, at least not above the fold. Instead, the tagline read: 4 lakh Great Indian Sellers, 1 Great Indian Sale.

It could be a coincidence that the change of format came just a couple of days after Reliance Chairman Mukesh Ambani put an end to speculation around the conglomerate's ecommerce venture. An announcement in which he clearly said that they would take on existing heavyweights Flipkart and Amazon.

It could also have been a reflection of the already-changing ecommerce landscape. Last month, the government changed the norms for FDI-funded online marketplaces. The changes, which are effective February 1, spelt bad news for both Flipkart and Amazon. For one, they can no longer offer exclusive merchandise deals (a move that played a key role in Flipkart's turnaround in 2017). Nor can they hold stakes in companies that are registered as sellers on their platforms.

As an Indian group, the FDI rules don't apply to Reliance. For another, its reach via Reliance Retail and Reliance Jio is incomparable.

That's the foundation.

Let's not forget that Ambani has rarely, if ever, gone into a business without a clear idea of how it will be profitable. When Reliance enters a space, it enters it to win the market. So far, the Indian ecommerce story has been about the consumer - attracted and retained with deep discounts financed with investor money.

The keyword has been GMV, not profitability. With Reliance stepping into the ring, the story could well become about the sellers. Reliance isn't just targeting the 12 lakh sellers in Gujarat, which Ambani referenced in his speech. They're targeting the 3 crore sellers and shopkeepers retailing online. And they intend to be profitable.

What that means for Amazon and Walmart-owned Flipkart will be interesting to see.


 

Report an issue
Add to
Shares
37
Comments
Share This
Add to
Shares
37
Comments
Share
Authors

Related Tags