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India's richest man fights Amazon with mom-and-pop shops

Mukesh Ambani's Reliance Industries tries bridging physical retail and mobile

Mukesh Ambani said Reliance Industries wants the group's retail stores to work as one with its Jio mobile business.    © Reuters

MUMBAI -- Reliance Industries plans tie-ups with small retailers to create a last-mile network for its e-commerce business, as company chairman and India's richest man Mukesh Ambani prepares to take on Amazon and the Flipkart-Walmart team.

The Indian conglomerate runs a chain of Reliance Retail stores and enjoys a small presence in fashion retail through its Ajio brand. But Ambani looks to create a hybrid model that brings under one platform Reliance Retail's 350 million customers as well as the 215 million users of Reliance Jio Infocomm's mobile services and the 50 million targeted customers of new fixed-line broadband service Jio GigaFiber.

"We will integrate the physical and digital marketplaces in a uniquely collaborative ... enterprise," Ambani said Thursday at the annual shareholders meeting. "We see merchants and small shop owners as critical customer interaction and fulfillment points who will share a mutually beneficial win-win relationship with us."

A Reliance tie-up will let small retailers do everything that large enterprises and e-commerce players can, Ambani pledged.

These merchants will be able to manage inventory, keep digital records and file returns, as well as improve management of working capital, retain and upgrade customers, access new customers, conduct promotions, run loyalty programs and link to the Reliance Industries supply chain, he said.

"We shall create this by [combining] the power of Reliance Retail's physical marketplace with the fabulous strengths of Jio's digital infrastructure and services," he said.

Reliance Industries plans its online retail game as global powerhouses such as Amazon and Walmart are pouring in money into India. These players possess their own strategy and logistics network, as well as tie-ups with local retailers to fulfill deliveries.

Amazon and Walmart-backed Flipkart together dominate 80% of the Indian e-commerce market, followed by Paytm Mall. Reliance Industries will face its toughest competition in this space.

Growing internet and smartphone penetration give India's e-commerce market the potential to become a $200 billion industry by 2026, up from $38.5 billion in 2017, the India Brand Equity Foundation says.

The conglomerate's consumer businesses -- Jio and Retail -- contributed about 13% to consolidated operating income for the fiscal year ended in March, up from just 2% a year ago.

Ambani, who mostly invests in oil and gas exploration and production, sees these new age businesses as strong contributors toward his ambition of more than doubling his operations by 2025.

Reliance Jio, with its cheap fees and fourth-generation mobile speed network, disrupted India's telecommunications business by triggering a price war with its entry in September 2016.

Malaysia-based Maxis Communications' India unit Aircel is insolvency proceedings. Reliance Communications, part of brother Anil Ambani's Reliance Group, sold its consumer business assets to Reliance Jio. The consumer mobile businesses of Tata Teleservices and Tata Teleservices Maharashtra merged into Bharti Airtel. A merger of giants Idea Cellular and Vodafone India is pending.

This consolidation leaves three big companies at the table -- Bharti Airtel, Idea Cellular-Vodafone India and Reliance Jio -- along with the much smaller, government-owned MTNL.

Reliance Industries also began manufacturing phones with internet-enabled features last year, selling 50 million so far.

The conglomerate now plans to disrupt cable television networks with the launch of Jio Giga Fiber, which will provide fixed-line broadband connection to houses and connect to set-top boxes for TV signal reception.

After that announcement, Reliance Industries shares closed at 965 rupees Thursday, down 2.53% on the Bombay Stock Exchange. Shares of other companies in the pay television business also slid. Local company Den Network fell 10.73% to 65.30 rupees, while Hathway Cable slid 15.40% to 20.60 rupees. Siti Cable's shares slipped 1.60% to 13.53 rupees.

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