The recent move by Reliance Industries to set up a $24 billion digital services holding company through which it plans to dominate ecommerce shopping in India, is not really limited to online shopping, but signals the emergence of the platform ecosystem which will not just encompass retail and e-payments, but will also include entertainment, social media platforms and much more. The idea is to have ownership of every point of consumption, be it retail, telecom or entertainment.
While platforms are the order of the day in the US and China, where Amazon and Alibaba dominate and Walmart is aggressively playing catch-up, in India, it is going to be a triangular platform battle between Reliance, Amazon and Walmart (Filpkart).
The advantage as of now is with Reliance. It not just has close to 11,000 stores across 6,700 cities and towns, encompassing an area of 23 million sq.ft, it also has the largest telecom presence through Jio, with 348 million subscribers. It is through Jio that the company plans to offer 4K entertainment to consumers and release films on the platform. It already has stakes in Viacom and Network 18. In the OTT space, it has picked up stakes in Balaji Telefilms and Eros Now. It also has as many 25 lakh kirana stores, where it has installed the Jio point of sales machines and is now trying to even have a say on their inventory and billing.
This strategy of owning consumers at various touch points is exactly what Alibaba, Amazon or even Walmart is doing across markets. While most know Alibaba as a core e-commerce company, within e-commerce it has multiple e-commerce sites. It has also started acquiring businesses in South East Asia. It acquired Singapore-based e-commerce firm Lazada in 2017 and Pakistan-based online retailer, Daraz. It invested in physical retail companies, Intime, Bailan and Hema. Alibaba's wallet, AliPay, is supposed to be the most sought after payment option of its consumers and is supposed to be an over $40 billion entity. China also has retailers such Baidu and Tencent, but Alibaba has a 70 per cent market share.
Since China doesn't allow social media companies such as Google and Facebook, Alibaba has developed its own ecosystem of Google, Facebook and WhatsApp. Alibaba also has its own film production arm.
Owning media properties is big for Amazon too. Apart from Amazon Prime Video which has subscribers in more than 60 per cent of homes in the US, Prime Radio is also a huge hit. Like Alibaba's AliPay, Amazon has AmazonPay. Amazon also acquired US-based physical grocery retail company, Whole Foods. The other advantage that Amazon has in the US is that US doesn't have taxes such as GST for online sales, and that's the reason it is able to offer discounts in the region of 12 per cent-18 per cent, without spending too much from its own pocket.
In India, the regulations don't allow Amazon or Walmart to have a physical presence as per the FDI norms. Amazon, however, has made indirect investments in Future Group, Shoppers Stop and in Aditya Birla's More. In addition to this it has also started on-boarding kirana stores, which it is using as last mile delivery points. It has so far partnered with over 23,000 neighbourhood stores. The company is also making huge investments on content for its video platform. Similarly, Flipkart, which got acquired by Walmart last year for a whopping $16 billion is also aggressively partnering with kirana stores. It has partnered with 17,000 local stores, while its fashion arm, Myntra has partnered with 15,000 stores. Walmart also has a cash and carry retail business. Flipkart is also in the process of launching its video streaming service.
Though both Flipkart and Amazon are currently using their kirana partnership for last mile delivery, the eventual plan is to push their grocery and private label business through these local stores. Last, but not the least, both Flipkart and Amazon are also aggressively trying to get more and more consumers on board through their payment wallets PhonePe and AmazonPay.
The platform game has just begun in India. While Reliance definitely has an upper hand, Amazon and Walmart are doing everything they can, in order to get a share of the 1.3 billion Indian consumption pie. It's not going to be easy for the two American giants to catch up with Reliance, but both of them have deep pockets.
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