Inside Mukesh Ambani’s Reliance e-commerce plan2 min read . Updated: 14 Jun 2018, 11:56 AM IST
Reliance Jio and Reliance Retail plan to sign on local merchants in an online-to-offline marketplace model pioneered by Jack Ma's Alibaba
Mumbai: Billionaire Mukesh Ambani is planning to enter the e-commerce business by combining the best of online and offline shopping experiences, a business model that will require zero cash burn to acquire customers.
As part of the plan being put together by two of Reliance Industries Ltd’s (RIL) consumer-oriented units—Reliance Jio Infocomm Ltd and Reliance Retail Ltd—the company plans to sign on local merchants, boosting their sales through what is known as O2O (online-to-offline) marketplace, a business model that Chinese e-commerce giant Alibaba has pioneered, said one person with direct knowledge of the matter, on condition of anonymity.
The move is in line with Ambani’s aim to generate half of the group’s revenue from the consumer businesses over the next 10 years. Currently, 80% of the group’s sales come from its traditional oil and gas business.
“Demand is going to come from tier 2 and 3 and 4 towns and cities. Then you need to have the ability to deliver at these places," said this person.
“At present, the cost of delivery will be very high, making this unviable. So, you have to create local markets and be present everywhere, where you know the local merchants and local customers and Jio will have to connect them," the person added.
An email sent to an RIL spokesperson remained unanswered till press time.
Under the O2O model, a consumer searches for the product or services online but buys it through an offline channel. RIL’s plan is to consolidate merchants under an e-commerce platform. The merchants, in turn, will cater to the demand from the untapped markets.
This will help the company save on costs by avoiding the discounting game and penetrate areas currently outside the traditional purview of e-commerce companies.
“Over a period of time, the company can pass on the demand to the merchant, since the (local) merchant is closer to the consumer," said the person cited above.
This is where Jio’s role converges with the strengths of Reliance Retail.
According to a Reliance executive, the company has a formidable physical presence in the country with 4,000 Reliance Retail stores, about 50 warehouses, and 4,000 Jio points, which will be scaled up to 10,000 over a period of time.
“That is going to help us in our e-commerce venture in a big way as each of them is a touch point to sign up merchants, and act as delivery points," the person said.