Ambani takes on Amazon in India’s booming online market

Bloomberg

Billionaire Mukesh Ambani obliterated rivals in India’s telecommunications sector by selling $2 data plans and free voice calls. Four years later,
he’s deploying a very similar tactic — cutthroat pricing — to gain an edge in the country’s
increasingly competitive e-commerce space.
As India hits the peak of its biggest shopping season, the festival of Diwali, the tycoon’s retail websites — including JioMart — are elbowing their way into a space long dominated by Amazon.com and Walmart’s local unit Flipkart Online Services.
Ratcheting up competition, Ambani’s portals are offering blockbuster discounts of as much as 50% on popular sugary confections and other holiday staples like spice mixes for India’s rice delicacy, biryani. Meanwhile, his Reliance Digital website is selling some flagship Samsung smartphones at prices cheaper than rivals, with as much as 40% rebates.
Reliance’s JioMart website is currently offering up to 50% discounts. It’s a push that comes as Ambani’s sprawling conglomerate, Reliance Industries Ltd, is flush with cash and has seen its shares rally about 35% this year. After raising an eye-popping $20 billion for its
technology venture, it’s shifted fundraising to its retail arm, which has won over $6 billion in investment in recent weeks from heavyweights like KKR & Co and Silver Lake. Already India’s biggest brick-and-mortar retailer, Ambani’s online ambitions pit him against the two US giants, both of which have invested big in India.
The country, one of the last big consumer markets, is still up for grabs, and Morgan Stanley estimates that India will generate $200 billion in e-commerce sales by 2026. Yet, the billionaire’s triumphs in telecommunications — where he started as a tiny player, but outpaced established rivals by undercutting them on price and capitalising on regulatory changes — are a cautionary tale for the American giants.
In retail, Ambani’s firm has a huge edge: Government policies are increasingly stacked in favour of domestic retailers, of which Reliance is the largest. Since the end of 2018, India’s foreign investment rules have also barred Amazon and Walmart’s local unit Flipkart from featuring exclusive products and owning inventory, in a bid to restrict their ability to directly influence prices and offer discounts. International companies aren’t allowed to own more than 51% of local brick and mortar supermarket chains. Even that limit is subject to conditions such as setting up only in cities with populations of less than 1 million.
With his local strategy, low-cost procurement and chain of brick-and-mortar stores, Ambani has the ability to shake up online retail, said Siju Narayan, Chief Experience Officer, RexEmptor Consult LLP in Mumbai. “JioMart can dent the fortunes of grocery e-commerce majors like Bigbasket & Grofers,” he said, referring to the country’s biggest online grocers. “And impact the grocery, home & personal care category of e-tail majors like Amazon and Flipkart in coming days.”
Many of Reliance’s brands can be sought under one roof at Reliance Malls.
Representatives for Reliance and Bigbasket declined to comment, while those for Walmart, Amazon and Grofers didn’t respond to requests for comment.
Ambani’s success in telecom shows his ability to benefit from pricing and policy. India’s government tweaked rules in 2013 to create a “unified license” that allowed operators with a broadband wireless permit to offer voice calls by paying a one-time fee. Only one operator had such a permit nationwide at that time — Reliance Jio. The new rules helped it move swiftly.
After receiving a unified license and rolling out Reliance Jio’s telecom services in September 2016, Ambani sold voice and data plans at rock bottom prices. That made digital services more affordable for millions of Indians.
In India, the stakes are high for the American retailers. Jeff Bezos, Amazon’s hard-charging founder and chief executive officer, has pledged to invest
$6.5 billion there. Walmart spent $16 billion in 2018 to acquire Indian portal Flipkart in its biggest ever deal, and has invested over $1 billion this year in the e-tailer and steadily plowed cash into its sister unit, payments service PhonePe.
Reliance is already India’s biggest company and its market capitalisation of $179 billion equals about 6.4% of India GDP.