The Indian e-commerce industry has been on an upward growth trajectory and is expected to surpass the US to become the second largest e-commerce market in the world by 2034. This overally crowded e-commerce industry will be further competition soon. Apart from Flipkart, Amazon, there is going to be one more contender very soon.
After concurring the telecom space, Mukesh Ambani led Reliance Jio is all set to create disruption in Indian e-commerce space by linking manufacturers and kirana stores to its existing Reliance Jio customers. As per modus operandi, Reliance Jio will offer its subscribers digital coupons to buy goods at Kirana stores on discounted rates. The announcement has come at a time when Flipkart and Amazon are going bullish to expand their grocery business. As per strategy, Jio will earn its cut by mediating between manufactures, kirana stores and Jio customers. It is worth noticing that Reliance also runs its grocery retail chains and a fashion portal called Ajio.com.
What could be disruptive factor?
We hardly see discounts on fast moving products such as milk, bread etc. And, all any sort of express delivery offer by any e-commerce player takes at least 24 hours (even the Amazon’s Prime) of delivery time. So just walking downstairs can get you milk at discounted rates instantly. Theoretically, it sounds very interesting...but how practical it is in long run. Speaking on same, India’s first e-commerce company Indiaplaza.com founder, Vaitheeswaran K said, “The reason people shop online is because of three reasons; wide assortment to choose from, the convenience of home delivery and low prices. The moment the customer is given a coupon to use it offline they would be forced to shop from much reduced selection and the convenience of home delivery will also gone. Therefore, an only benefit remains is the low price. So, until the pricing is extremely low, this might not be a sustainable model.”
Fundamentally, airlines and telecom are similar business models where basis infrastructure is bought first then you grew your customer base. Off course, the larger customer base helps the company. The concept of e-commerce is drastically different, every time a customer shop online, it is additional cost to logistic, gateway service, product cost, gross margin by trading of the product.
“Reliance has succeeded with telecom business and replicating the same strategy might not work in e-commerce space. Will they able to create disruption in market by dropping cost? Yes, they might be..”, he said.
Also, e-commerce in India is spreading the wings in such manner that even small towns have not remained untouched. So, general trade or kirana also sees no advantage out of it. “Across the country, in many towns people are singing up with online sites to scale up the distribution. So, general trade is already beginning to get their share on e-commerce place,” he said. Reliance has nothing to do with it.
So, who will be the ‘Winner’?
Despite burning cash none of the e-commerce company be it Flipkart or Amazon has not become profitable in this country . For the matter of fact, Reliance Jio is also not profitable yet. Certainly, steep discounting is not the viable business model. “Eventually it will become profitable, whatever is the business, if it is popular among the customers, it will become profitable. In India customers are loving e-commerce, so I have no doubt.”
However, if the current players will be profitable in future is different question altogether.