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Why brokerage Bernstein sees Reliance winning India ecommerce war in long run

Reliance is the best-placed player ahead of giants Amazon and Walmart in the $150-billion Indian ecommerce market, according to a note by brokerage Bernstein.

India is evolving into a three-player market with these three companies having cornered the lion’s share among them, the note said.

As per Bernstein, what makes Mukesh Ambani’s Reliance the most potent force is primarily a combination of three factors — largest retail store network, dominant telecom operations and strong digital media.

“We believe Reliance Retail/Jio is the best-positioned player in the largest and fastest-growing e-commerce market. The advantages of its retail network, mobile network, digital ecosystem and ‘home field advantage’ in a famously complex regulatory and operating environment mean in the long term, it will likely claim the lion’s share of the USD 150 billion-plus e-commerce marketplace,” the report said.

Bernstein believes the Indian ecommerce market will be different from other markets. The note cites distribution-related challenges and India’s propensity to “skip a generation in most technologies” as reasons for that.

In a market like India, an integrated model (offline + online + prime) is critical for success, the brokerage said, as “strong distribution capability and superior cost advantage (against online players) are required from the start.”

Reliance’s disruptive, integrated playbook makes it the strongest contender for pole position in the Indian market, Bernstein noted.Reliance is building the most expansive digital ecosystem in the country, the note observed. Apart from the company’s offline and online strength, the report also take note of its “compelling prime apps — JioTV, MyJio, JioSaavn and Jio Prime”.

Jio, the conglomerate’s telecom arm, has 430 million mobile subscribers; its retail arm has 18,300 retail stores in India and $30 billion in sales. Besides, the company’s digital mix is scaling up 17-18 per cent (USD 6 billion, e-commerce).

Reliance has 400,000-plus people in its retail business. In 2023 so far, it has hired about 69,000 new employees against about 66,500 exits). The turnaround in the company is lower than the 30-40 per cent annual churn seen in organised retail in the country, said the Bernstein note.

The company’s recent sackings because of performance-related issues is less than 0.14 per cent of the entire workforce, it added.

India is coming up fast as a lucrative ecommerce market but is still seen as under-penetrated. As for company-wise market share, Flipkart ($23 billion gross merchandise value or GMV) and Amazon ($18-20 billion GMV) lead on scale, with the two having about 60% market share currently. Reliance is third in the sweepstakes at present ($5.7 billion e-commerce sales) driven by attractive categories of fashion (Ajio) and JioMart (e-grocery), Berstein said.

On the competition among the three giants, Bernstein said fashion has become the largest category in e-commerce. It said fashion became the largest category with 25 per cent GMV share and grew over 40 per cent in 2022 while the mobile category grew 7 per cent in 2022.

India added over 40 million online shoppers in calendar year 2022 with 16 million added from fashion. Reliance has the strongest position in fashion, with Ajio and Reliance Trends with a 20 per cent market share, the report noted.

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