Reliance Retail to Enter E-Commerce Segment

After a host of businesses started their own e-commerce portals, Mukesh Ambani owned Reliance Retail finally pulls the trigger and joins the Indian e-commerce bandwagon.

A technical team commissioned by Mukesh Ambani has commenced work on the project. Reliance Retail may look to adapt a marketplace model made famous by the likes of eBay and Amazon.New entries into the e-commerce space are still discovering what model to adopt based on their needs. A source close to Reliance Retail said that the chain is evaluating all possibilities. The company is looking at multi-channels to retail, which has been made clear in presentation to analysts during the latest quarterly results.

Reliance Retail runs over 1500 stores across the country in sectors as diverse as jewellery, electronic goods, and apparel apart from the supermarket type stores. The company posted sales of nearly Rs 3,500 Crores in the third quarter of 2013. This represents a jump of 31% from a year ago. The company’s EBITDA stood at 165 crore in the first half of FY 2014. The MukeshAmbani behemoth, Reliance Industries, also runs a closed b2b e-commerce portal for businesses wanting to purchase Polyester and other products produced by the group.

The Indian e-commerce market continues to grow at a fast pace. It was worth $2.5 billion in 2009 and increased by over 450% to $14 billion in 2012. Of this, online retailing comprises a comparatively small percentage of about 12.5%. However, it’s safe to assume that this figure will grow exponentially over the coming years. India’s online shoppers are growing too. The online shopping community shows a staggering CAGR (Compounded Annual Growth rate) of 30% compared to the global rate of 8-10%.

There are 75-100 Indian players in the highly lucrative e-commerce segment here. Most of them are start-ups founded by ambitious youth. The majority of these companies have received the backing of top dollar venture capitalists and private equity firms. Along with these local start-ups, global giants like eBay and Amazon are a part of the growing industry too. While Amazon entered the Indian online marketplace segment just last JuneeBay entered India almost a decade ago with its buyout of bazee.com.

Compared with organised retail, which is restricted to metros and big cities and has a penetration of only 7-10%, the opportunity offered by e-commerce is huge as it allows companies to ship most products anywhere in the country. The country’s Internet user base is expected to almost treble to 300 million in about two years and this would result in new users and further growth for companies in the e-commerce segment.

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