Reliance Industries - Then and Now


Covid-19 was a boon for the digital era, it only accentuated the need to have digital businesses which cater to the changing consumer behaviour.


Context


Talking about how businesses pivot to excel in dynamic times, I have an example for you- Reliance.


It initiated with the textile business, pivoted to petrochemicals and oil refining, since then Reliance has undergone a tectonic shift to become a full consumer-facing business. 


Reliance has found a crown jewel, Technology, which has made the world’s most valuable companies including the likes of Apple, Microsoft, etc. 


The Game


Let us talk about how Reliance does business.


One word- Price war!


Look at the telecom sector, at one point about a dozen players were competing, with the advent of Jio, the number has plummeted to just three with Jio being the largest of all.


Launched in 2016 as a tiny player, Jio cut prices to an extent that it offered 4G services free and opened the vast world of internet to the masses. Since then, digital payments, digital shopping, doing virtually anything on the internet became possible.


Online World


The broader point is that Reliance loves cutting prices owing to the deep pockets it has, and they also leverage their political clout to be the greatest in whatever they try their hands on!


Take Retail, it is already the biggest offline player with the maximum number of stores under it but that does not suffice! In retail, you need to have a blend of offline and online to build an empire, that is the reason you are seeing JioMart (online venture of Reliance) buzzing. 


In a way, the fight is only to win the online scene!


Vocal for Local


Before diving into the roadmap Reliance has to capture e-commerce, I would like to point out that the situation is already inclined towards it.


All of us know that the Modi government is a huge supporter of growing the local economy, and Reliance is the undisputed champion of the local economy with a market capitalization of $185 Billion.


As per the FDI (Foreign Direct Investment) norms, foreign players are neither allowed to offer any discount nor to own any inventory and in the case of ownership as well, they cannot have more than 51% stake in any local retailer. 


In short, there are a lot of restrictions for foreign companies in retail which gives Reliance an edge in the game!


Potential


As per Morgan Stanley, e-commerce sales would touch the quantum of $200 billion by 2026, so indeed there is a lot of potential!


It is a no brainer that Indian consumer is very price-conscious, and Mukesh Ambani knows that better than anyone. 


Reliance was on a funding spree over the past months, having raised $20 Billion for its technology arm, it swiftly switched towards its retail arm and until now it has raised $6 Billion from investors including the likes of KKR, Silver Lake and General Atlantic, etc.


In the Diwali sale, Reliance was offering Samsung phones at a 40% discount. The flagship phone of Samsung (S20) was offered by Reliance digital at Rs. 44,000/- while Amazon was offering it at Rs. 48,000/-


You see the difference there; this happens when you are flushed with the cash you offer the product at rock bottom prices and win the customer!


Difference!


This time there is a stark difference, 4 years ago, Jio competed with domestic companies which lacked funds, experience. Unlike telecom, Reliance is going head-on with the biggest players globally. 


Amazon is being run by Jeff Bezos, richest man on the planet and Walmart is the largest retailer in terms of volume. So, there is no question about pockets or know-how. Both the foreign companies have invested big in India, so, it is a cutthroat competition!


Conclusion


For any business to succeed, it needs to have a great understanding of its consumer, a good political relation, and capital!


Reliance ticks all the boxes well and to build a strong foothold in e-commerce, it is going on a rampage, acquiring a controlling stake (more than 50%) in diverse internet startups including Netmeds, and the most recent one, Urban Ladder. 


The company is being run by Asia’s richest man and has decimated competition. The only thing which needs to be seen is, how it progresses and deals with the biggest companies of all time! It would be a lot of fun!


Written by – Manvinder Arora


Edited by - Ivanova