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OPINION | Reliance's Plan of Online-to-Offline Platform Shows Growing Importance of Retail in RIL Universe

Through the deployment of ‘merchant point of sale’ for small shop owners, RIL plans to enable them to do everything that large enterprises and large ecommerce players are able to do.

Sindhu Bhattacharya |

Updated:July 6, 2018, 9:44 AM IST
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OPINION | Reliance's Plan of Online-to-Offline Platform Shows Growing Importance of Retail in RIL Universe
A worker pushes trolleys outside the Reliance Market superstore in Ahmedabad. (Image: Reuters)
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New Delhi: Reliance Industries is doing spectacularly well in the retail business, which spans petro chemicals, apparel, electronics, groceries, fashion and lifestyle and connectivity. It is already the largest in this business, in terms of revenue as well as network. As speculation grows about a possible listing of this business, RIL has begun talking about bringing together offline and e-commerce activities on a newly developed integrated platform. The development of such a platform could well unleash a major disruption in the retail market. It would perhaps be a long-gestation business but has a large revenue potential.

Remember, whether it be Walmart or Carrefour or Amazon, no one in the world of retail today has an integrated platform for e-commerce which seamlessly connects online with offline. Speaking at the AGM on Thursday morning, RIL chairman Mukesh Ambani said, “As RIL transitions to become a technology platform company, we see our biggest growth opportunity in creating a hybrid, online-to-offline new commerce platform. We shall create this by integrating and synergising the power of Reliance Retail's physical marketplace with the fabulous strengths of RJio's digital infrastructure and services.”

He said this platform will bring together the 35 crore customer footfall at Reliance Retail stores, 21.5 crore RJio customers and nearly three crore small merchants and shop-keepers from all across India.

Through the deployment of ‘merchant point of sale’ for small shop owners, RIL plans to enable them to do everything that large enterprises and large ecommerce players are able to do. They will be able to manage inventory, keep digital records and file returns, improve working capital management, retain and upgrade customers, access new customers, run promotion and loyalty programs etc.

Ambani said advanced tech such as augmented reality, holographic technology and VR devices would be used on this new platform. And digital tools will help predict the needs of shoppers. Besides, the existing and deep insights of Reliance Retail into Indian customers, its large local presence and superior supply chain will further help small merchants. This platform is expected to offer financing to small shopkeepers and merchants.

Analysts said that this may be a long gestation business but one that had a large revenue potential since this model doesn’t exist as of now. And RIL will anyway be able to leverage its existing businesses through this platform.

RIL has been enhancing focus on the two consumer facing businesses – retail and telecom – in the last year and their combined contribution to the company’s margins has jumped to 13% in a single year from just 2% in the previous fiscal. While there is robust growth in telecom, it is also a highly capital intensive business, leaving retail to bring in a disproportionate share of increased revenues.

In the January-March quarter of 2018, the retail business of RIL saw revenues more than doubling and Ebitda (earnings before interest, tax depreciation and amortization) nearly tripling. Margins expanded 127 basis points during the quarter.

Brokerage CLSA has said in a note to clients that it expects a 25% revenue CAGR between now and 2020. The grocery segment has shrunk for Reliance Retail and now accounts for just a fifth of revenues from almost a third till 2016-17. Maximum growth has been seen in the connectivity business which now accounts for a third of the retail revenues from just 3% in 2016-17.

A recent report by brokerage Goldman Sacs hinted at an IPO for Reliance Retail. Reliance Retail is the largest in the business, with revenues nearly double the size of the next competitor D-Mart. So while there are a host of positives to an eventual listing already, perhaps the biggest push could come from the integrated platform for offline and online ecommerce, which Ambani mentioned in his speech today.

In any case, the singular focus that RIL has now given to its twin consumer facing businesses would, in Ambani’s own words, lead them to contribute almost 50% to RIL’s revenues in coming years. A listing or not, this alone is a marker of the growing importance of retail in the RIL universe.

(The author is a senior journalist. Views are personal.)

(Disclaimer: News18.com is part of Network18 Media & Investment Limited which is owned by Reliance Industries Limited)​
| Edited by: Ahona Sengupta
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