Reliance Retail and Jio are best-positioned players in the largest and fastest-growing e-commerce market in the long term, according to brokerage Berstein.
In a report ‘The Long View: India eCommerce – A 150 bn dollar market. Three players. One Disruptive Playbook’, the brokerage said that Reliance Retail and Jio have several advantages including “home field advantage”. “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, its mobile network, its digital ecosystem and its ‘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 US$150 Bn+ eCommerce marketplace,” the report said.
The Indian e-commerce market is the largest opportunity in the Indian internet ecosystem. It is expected to reach USD 133 billion by 2025 from USD 24 billion 2018, a 5x market, with 30 per cent CAGR, the report said.
According to Berstein, this is a USD 100 billion incremental opportunity with only three scaled players in the market, namely Walmart, Reliance Jio and Amazon. Berstein also said the winner in the Indian e-commerce market will be the one with the most-compelling integrated value proposition, in terms of offline, online and as well as prime.
Reliance Jio has the most disruptive playbook, using an integrated approach to consumers – USD 18 billion gross merchandise GMV value (Reliance Retail), 355 million consumers (Reliance Jio) and compelling prime apps (JioTV, MyJio, JioSaavn and Jio Prime), the report said.
“Both platforms provide the widest selection in core categories and fast and reliable delivery. Flipkart was the first mover in e-commerce in India. Flipkart’s GMV was at USD 15 billion in FY20 and USD 23 billion gross merchandise value (GMV) which includes Myntra in FY21. Reliance Retail during the recent fourth quarter (Q4FY230) results provided its digital mix (proxy for e-commerce) at USD 5.7 billion. Meesho is currently at USD 5-billion gross merchandise value (GMV).”
The report compares the three giants in terms of focus on multiple services with large technology acceptance model (TAM), fashion becoming the largest category in e-commerce, Get Fit and Get deep, strong partnership network and government’s regulation on foreign direct investment (FDI).
Along the lines of focusing on “multiple services with large TAM”, the brokerage said it expects Jio to become “the core platform for India’s digital economy”. As more consumers and small business move online, Berstein said it sees an expansion of India’s digital technology acceptance model (TAM) which it expected would reach a trillion dollars by 2025.
While discussing competition of these e-commerce giants, the report said fashion has become the largest category in e-commerce. It said fashion became the largest category with 25 per cent gross merchandise value (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 CY22 with 16 million added from Fashion. Reliance is the strongest positioned in fashion with Ajio and Reliance Trends with a 20 per cent market share.
According to the report, now the key focus for the e-commerce giants is to Get Fit and Get deep (expanding deeper into Tier2/3 markets). “Reliance is the only profitable business at 6-7 per cent EBITDA while both Amazon and Flipkart are negative EBITDA. Reliance Retail is deep in Tier II/III markets with over 70 per cent stores in those markets.”
It said categories like Grocery (Fresh) have traditionally used a 1P or inventory-led model. The inventory control and management of supply chain logistics are essential to maintain the customer experience. Grocery is a large category in retail with more than 70 per cent of the market share. Reliance has 20 per cent of revenues coming from grocery, the report said.
1P refers to a first-party relationship with a retailer such as Amazon or Flipkart. With this selling model, the seller act as a wholesale supplier for the retailer, which will then sell sellers’ products to their end-customers and take care of every aspect of fulfilment.