As Walmart (NYSE:WMT) and Amazon (NASDAQ:AMZN) are busy drawing the battle lines in India, one company is planning to crash their party. Reliance Industries, the retail-to-refining conglomerate led by the world's 19th richest man, Mukesh Ambani, recently announced its intentions of making a big dent in India's retail space.
You might not have heard of Reliance Industries, but the company is definitely a force in India. It recently became the second Indian company to cross a market cap of $100 billion thanks to interests in industries such as energy, textiles, petrochemicals, telecommunications, and retail.
More important, the company has shown it is capable of disrupting new markets. Reliance started operating its 4G LTE service, known as Jio, in India in September 2016. It hurt rivals badly by offering free services for the first seven months.
Jio now has 215 million subscribers and 20% market share in the Indian telecom space, after less than two years in the market. It is rapidly closing in on market leader Airtel, which currently controls nearly 30% of the market.
Reliance spent a total of $36 billion to set up its mobile and broadband infrastructure in the country, so it isn't scared of spending big to dominate its markets. As such, Reliance's new ambition of capturing a lion's share of the Indian retail market should not be discounted; it seems to have the firepower to disrupt it.
Reliance's ambitious designs
Reliance hasn't given a detailed blueprint for tapping the Indian retail market, but Ambani did provide an outline during a shareholder meeting that was reported on by Bloomberg. The company plans to use small merchants, its existing retail locations, and the strength of its Jio user base to create a hybrid online-to-offline shopping experience. More specifically, Reliance plans to tap 30 million small merchants and shopkeepers, 350 million customers in its retail stores, and 215 million Jio subscribers.
The company's massive Jio user base gives it ready access to a vast pool of potential customers as it can integrate its app into both smartphones and feature phones using its services. Customers can then shop on the app and go to a nearby store to pick up the items bought online, or get those items quickly delivered to their doorstep thanks to the small merchant stocking those products.
These small merchants will turn into points of sale for Reliance's retail products. They might even turn into demonstration points for larger items that the company sells in its dedicated retail locations. That will be done with technologies such as holographs, augmented reality, and virtual reality, which Reliance is promising to bring to its e-commerce platform.
The company's retail division, Reliance Retail, currently operates more than 7,500 stores in 4,400 cities across India, spread across a massive 17.7 million square feet. The popularity of these stores has soared of late, as revenue in the latest fiscal year more than doubled to over $10 billion, despite having almost negligible online presence.
These Reliance Retail stores will ensure that small-merchant partners are adequately stocked to meet online shopping demand, allowing the company to deliver an omnichannel shopping experience. The company plans to offer a wide variety of products online, including groceries, mobile devices, and other electronic items.
It will be relatively easier for Reliance to move into these markets as it already sells such items online through Reliance Fresh grocery stores and Reliance Digital electronics stores.
Reliance aims for the top
Reliance Retail is hugely popular in the offline retail market in India, as the booming sales numbers show. And it has the required infrastructure to make the jump into e-commerce.
By comparison, both Amazon and Walmart are smaller in terms of the business they do in India. According to Forrester Research, online sales in India stood at nearly $20 billion last year. Flipkart held close to 32% of this market, with Amazon following closely at 31%. So the combined online sales of both companies stood at nearly $13 billion.
Once Reliance leverages the strength of its offline infrastructure to launch into the e-commerce realm, it could widen its retail lead over Amazon and Walmart's Flipkart given its widespread presence across the country. In fact, Reliance plans to become the largest e-commerce platform in India by 2020, and it won't be surprising if it does so.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.