As Indian conglomerate Reliance looks set to oust Amazon and Walmart-backed Flipkart in the race for the country’s $150 billion e-commerce market, Bernstein analysts presented clients with a scathing report this week that challenges prevailing global views. Electricity house.
Bernstein’s launch hinges on a quartet of attractive advantages that he argues will propel Reliance to the top: a strong retail network, a widespread mobile network, a holistic digital ecosystem, and a “home field advantage” in a notoriously challenging regulatory landscape. . The wealth management firm said these factors would help Reliance capture the massive e-commerce market in the long run.
Reliance Retail, a subsidiary of Reliance Industries, is already a dominant force, operating the country’s largest retail chain with over 18,000 stores. Bernstein sees the group’s huge physical presence, bolstered by several recent acquisitions of retail companies focused on e-commerce, and a partnership with Meta to develop a small business communication platform through WhatsApp Business. constitute a formidable “competitive gap” for the Indian. Electricity house. E-commerce still accounts for less than 10% of total retail in India.
In contrast, Flipkart, which is heavily dependent on the wireless and mobile category — accounting for half of e-commerce sales in India — is facing concerns over a slowing in the country’s smartphone shipments. Furthermore, the low-margin nature of the smartphone category makes it necessary for both Flipkart and Amazon to grow their high-margin categories.
For Amazon, the recent $12.7 billion investment in Amazon Web Services in India suggests a shift in focus towards cloud services in the South Asian market. Bernstein’s report shows that Amazon’s cloud business operated with a loss of only $500,000 to $1 million, with the e-commerce division losing up to $500 million in India.
In addition, Amazon is losing ground in high-profit categories such as fashion. While Flipkart claims 60% market share in this segment, Amazon captures only 20%. According to Bernstein, Reliance’s AJio is already garnering over 15% of the fashion market.
Bernstein valued Reliance Retail’s e-commerce business at $36.4 billion, surpassing Flipkart’s adjusted $33 billion valuation following the spin-off of PhonePe.
Arguably the biggest hurdle facing Amazon and Flipkart is India’s complex regulatory environment. Local law prevents these marketplace-model firms from directly buying, selling, and pricing goods. In contrast, Reliance’s inventory-based model allows it to navigate these challenges with increased inventory control, pricing autonomy and improved customer experience.
Bernstein also argues that India’s relatively underdeveloped seller ecosystem hinders the execution of a pure marketplace model, a model that accounts for more than 80% of e-commerce gross merchandise value in China. Despite this, they note, the third-party model proves victorious in terms of SKU depth and is more straightforward in China due to merchants’ specific responsibility for fulfillment through express delivery companies.