Billionaire Ambani’s Reliance is seen as India’s e-commerce kingpin

Indian conglomerate Reliance is poised to edge out Amazon and Walmart-backed Flipkart in the race for the country’s $150 billion e-commerce market, Bernstein analysts projected in a scathing report to customers this week, challenging prevailing industry views that favor the established global market. power stations.

Bernstein’s projection rests on a quartet of compelling advantages that they believe will propel Reliance to the top: a robust retail network, an expansive mobile network, a holistic digital ecosystem, and “home-field advantage” in a landscape notoriously difficult regulation. These factors should help Reliance capture a majority of the massive e-commerce market in the longer term, the wealth management firm said.

Reliance Retail, a subsidiary of Reliance Industries, is already a dominant force, operating the largest retail chain in the country, with over 18,000 stores. Bernstein sees the conglomerate’s expansive physical presence, bolstered by numerous recent acquisitions of e-commerce-focused retail companies, and a partnership with Meta to develop a small business communications platform through WhatsApp Business as a formidable “competitive gap” for the Indian. central. E-commerce still accounts for less than 10% of overall retail in India.

Reliance Retail ecosystem. (Image and analysis: Bernstein)

In contrast, Flipkart, which relies heavily on the wireless and mobile category – accounting for half of India’s e-commerce sales – is facing concerns as the country’s smartphone shipments slow. Additionally, the low-margin nature of the smartphone category necessitates both Flipkart and Amazon to grow their high-margin categories.

For Amazon, the recently pledged $12.7 billion investment in Amazon Web Services in India suggests a shift in focus towards cloud services in the South Asian market. Bernstein’s report reveals that while Amazon’s cloud business is operating with losses of just $500,000 to $1 million, the e-commerce division lost up to $500 million in India.

Additionally, Amazon is losing ground in high-grossing categories such as fashion. While Flipkart claims a 60% market share in this sector, Amazon captures only 20%. Reliance’s AJio is hot on their heels, already securing more than 15% of the fashion market, according to Bernstein.

Bernstein values ​​Reliance Retail’s e-commerce business at $36.4 billion, topping Flipkart’s $33 billion adjusted valuation after the PhonePe split. The wealth management firm values ​​Reliance Retail at $110.9 billion.

Arguably the most formidable hurdle Amazon and Flipkart face is India’s complex regulatory environment. Local laws prevent these market model companies from directly owning, selling and pricing goods. In contrast, Reliance’s inventory-based model enables it to meet these challenges through inventory control, pricing autonomy and improved customer experience.

Business practices and e-commerce regulations in India (Image and analysis: Bernstein)

Bernstein also argues that India’s relatively underdeveloped seller ecosystem hampers the execution of a pure market model, one that is responsible for more than 80% of the gross value of e-commerce goods in China. Despite this, they note, the third-party model proves victorious in terms of SKU depth and is simpler in China due to merchants’ typical liability for fulfillment through express delivery companies.