Will Reliance Retail's online-to-offline model succeed?

Mukesh-Ambani-Reliance-Jio Mukesh Ambani | File

Reliance Industries Limited (RIL) is planning to create a new hybrid online-to-offline (O2O) commerce platform. Given a perfect synergy with Reliance Jio's digital infrastructure, the idea is expected to succeed but there could be some challenges too. Reliance's entry is expected to disrupt the Indian retail market since e-commerce is no longer confined to pure web presence and many companies such as Amazon and Tesco, have successfully introduced the O2O model in other markets. Experts with whom THE WEEK spoke to feel that Reliance with its huge physical retail presence and backed by the vast network of Jio will make a deep impact on the retail and e-commerce market in India. However, all this may also come up with a set of challenges.

“E-commerce is no longer a pure web presence. Even Amazon has realised it and has purchased Whole Foods in the US. With Walmart buying Flipkart, it is building a hybrid model where they will use Flipkart for the online presence and the Walmart stores for the physical presence. In the United Kingdom, Tesco is already doing it. The customer can place his or her order through the Tesco portal and can take delivery of the goods in the nearest Tesco store. In India too, Amazon is doing something similar. You have their two-hour delivery for Prime customers in select metros. They also offer customers a choice of pickup points where the customer can pick up the ordered goods,” Kris Lakshmikanth, founder and CEO of The Head Hunters India, an executive search company, told THE WEEK.

Lakshmikanth feels that Reliance will be able to do well in India with its hybrid model since it is a deep-pocketed business organization. “You need to have deep pockets to survive the e-commerce battle. It is not a 100-metre sprint, but rather a marathon. Reliance has proved through Jio that they have the capacity to take losses and build market share. The company has over 4000 outlets owned by them where they sell various items – grocery, garments, and electronics. These 4000 odd outlets will become the front points for the delivery of e-commerce orders to the customers across India. On the top of it, Reliance can and will leverage on the vast presence of Jio's network across India,” added Lakshmikanth.

Lakshmikanth also observed that the retail business is a supply chain game and Reliance have a proven track record as they were offered to buy Flipkart and earlier Jabong too. He added: “With their existing infrastructure, Reliance can achieve the depth and width of Walmart and Flipkart. Shortly, there will be more than one player in a country like India. I expect Amazon, Alibaba through Paytm Mall, Flipkart/Walmart and Reliance Retail to be among the top four players in the country.”

Alok Shende of Ascentius Consulting, Mumbai feels that Reliance Retail's putative entry in the hybrid retail model is by betting on its considerable strength in the sphere of traditional retail presence. “E-commerce model such as hyper-local can leverage strong localised retail presence. This framework entails local delivery of retail good to households in the retail catchment area and while it certainly brings convenience, it is not a radical model to create a non-linear growth in the lines of pure e-commerce business,” said Shende.

Shende observed that such models can have challenges too. “As traditional retail firms aspire to adopt the intrinsic e-commerce models on the lines of Amazon or Flipkart, problems galore. For example, even the world's largest traditional retail business, Walmart has not been able to establish a toehold in the e-commerce market. Second, the business architecture of pure-play model and traditional retail model is diagrammatically opposite. E-commerce firms have adopted the hub and spoke network framework versus the local supply chain model of traditional model. Lastly, operational knowledge and experience, deep expertise of analytics, and delivering outstanding customer experience are significant challenges to replicate for firms that are traditionally retail centric,” added Shende.