Agencies
Mumbai: Amazon.com and Walmart Inc.’s plans to dominate India’s online retail landscape have been ambushed by Prime Minister Narendra Modi’s political priorities heading into a tightening election.
The vote, which must be held by May, has increased the influence of local retailers that lobbied for growth-crimping curbs on the US giants. On cue, India this month rolled out constraints on foreign e-commerce players including Jeff Bezos-led Amazon and Walmart-owned Flipkart, which together control 70 percent of its online shopping. The tighter rules, aimed at protecting small traders, may end up benefiting, Mukesh Ambani, who is building a home-grown competitor.
The Bharatiya Janata Party is still licking its wounds after being trounced in three key recent state polls and a year ago fighting an unexpectedly close contest in Gujarat — Modi’s home state. Among small businesses, which are a traditional support base, the government’s popularity has been eroded by 2016’s surprise cash ban and the subsequent chaotic roll out of a new sales tax.
The rules now bar Amazon and Flipkart Online Services Pvt. Ltd. from owning inventory, and require them to treat all vendors equally, throttling discounts and exclusives — a huge advantage to homegrown companies including Ambani’s new venture. His Reliance Industries Ltd., which owns India’s largest retail chain and third-biggest telecom network, has the potential to evolve into a local version of Amazon or Alibaba Group Holding Ltd., UBS AG said last month.
“Whether serendipitous or not, India’s tightened regulatory regime for online retailers is a huge win for Reliance with its new retail ambitions,” said Sanchit Vir Gogia, chief executive officer of consultancy Greyhound Research. “This could be a field leveler for them.”
Ambani wants his consumer offerings — covering telecom, fiber-to-home broadband, media and entertainment and retail — to contribute nearly as much to the conglomerate’s overall earnings as its bread-and-butter energy and petrochemicals businesses.
He’s fresh from disrupting the nation’s telecom sector, which he entered in 2016 with services so cheap that rivals have quit, merged or gone bankrupt, including a carrier controlled by his younger brother.
On the back of that success, he last year unveiled plans to create a model that combines Reliance’s consumer offerings into a “hybrid, online-to-offline new commerce platform.”
Analysts at UBS predict Reliance can gain market share in new-age retail given its starting point of 280 million telecom subscribers, a broadband offering, extensive content and a web of 10,000 stores nationwide. The company also wants to partner with India’s 12 million mom-and-pop shops to create distribution and delivery centers.
Reliance resembles Alibaba in its ability to offer bundled services in a fast-growing, fragmented market with low online penetration, according to UBS.
“In retail/e-commerce, despite competition from well-funded global companies, Reliance’s wide footprint of physical stores along with its omni-channel focus, subscriber reach and regulations governing foreign e-commerce entities,” could help it gain market share, analysts including Mumbai-based Amit Rustagi wrote in a Jan. 24 report.
Representatives for Reliance, Walmart, Amazon and India’s commerce ministry didn’t respond to requests for comment.
(Except for the headline, this story has not been edited by The Kashmir Monitor staff and is published from a syndicated feed.)
