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MUKESH VS. MUKESH

India’s young e-commerce firms now have a new competitor: the country’s richest man

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EPA/Harish Tyagi
Entering a new game.
  • Itika Sharma Punit
By Itika Sharma Punit

Co-editor, Quartz India

This article is more than 2 years old.

Mukesh Ambani’s latest move will pit the 58-year-old chairman of Reliance Industries (RIL)—and India’s richest man—against 30-something-year-old internet entrepreneurs.

On Oct. 16, RIL—which owns Reliance Retail, India’s largest brick-and-mortar retail chain, among other businesses—said it plans to launch e-commerce platforms for fashion and electronics by the end of this year.

“Reliance Retail 2.0 initiatives encompassing fashion and lifestyle e-commerce, development of marketplace platform and building distribution ecosystem for Jio devices are on track and gearing up for rollout in a staged manner,” RIL said in a press release announcing its earnings for July-September 2015.

So far, the e-commerce sector in India is largely led by young entrepreneurs—mostly first-generation businessmen—with the backing of global venture capital and private equity firms. India’s e-commerce poster boy Flipkart, for instance, is headed by its 34-year-old co-founder and chief executive officer Sachin Bansal. Its close competitor, Snapdeal, is led by Kunal Bahl, 32.

In comparison, RIL was started in 1966 by Ambani’s father Dhirubhai Ambani. It has interests in everything from petrochemicals to oil and gas, and it is one of India’s largest private sector conglomerates.

But it won’t be easy. For one, despite booming sales on the back of advertising and discounts, there are doubts over the profitability of India’s e-commerce companies. Still, the market leaders are well-financed, with deep pockets, and are swiftly building leadership teams that are drawing from the best in the business globally. Alongside, there’s an appetite for risk and swift innovation, which traditional establishments may find hard to match. In any case, no existing player will cede ground without a fight, and RIL is unlikely to have a free run of the field.

On the upside, though, RIL’s e-commerce foray will also dovetail with the company’s big telecom venture, Reliance Jio. In fact, several features of Reliance Jio—such as mobile wallet, Jio Money, and 4G telecom services—will complement the company’s online retailing plans.

“What RIL is bringing to the table is fundamentally much bigger than what any of the existing players offer,” Arvind Singhal, chairman of consulting firm Technopak, told Quartz. “Their e-commerce offering will include elements like entertainment, gaming, and financial services, so they are bringing a much larger value proposition on one platform.”

In its trademark style, RIL plans to launch its e-commerce venture at scale. Executives of the company told reporters that RIL’s e-commerce platforms will have 150,000 vendors. In comparison, Flipkart, which has been in the business for over eight years, operates with only around 40,000 sellers on its platform and is targeting 100,000 sellers by December 2015. Amazon India, which started operations in June 2013, currently works with around 50,000 active sellers; and Snapdeal, which started its marketplace in 2012, has around 200,000 vendors.

RIL’s fashion e-commerce platform will source products through partnerships with international brands from Singapore, Australia, Russia, Switzerland, China and Turkey. The company will also set up a separate portal to sell electronics, which will offer all devices that are currently sold by Reliance Digital, the electronics retail chain of RIL.

RIL runs an online grocery retail business, which is currently limited to Mumbai. With the e-commerce launch, this business will be expanded to other cities.

Despite Indian e-commerce space being overcrowded, RIL may well be able to create a niche for itself. “RIL will not have any disadvantage of entering the market later than some others because the company has such high brand recall that customers will be drawn to it,” Singhal of Technopak said. “They are a formidable competitor that all the existing players much watch out for.”

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