Amazon-Reliance Tie-Up May Transform India’s eCommerce Landscape

The old saying goes: The enemy of my enemy is my friend.

So it is in India where — if it happens — Amazon’s taking of a stake in Reliance Industries Ltd. may herald a partnership designed to grab a significant chunk of the eCommerce market and ward off players like Walmart (which of course owns a majority stake in Flipkart).

Bloomberg reports that Reliance (and specifically billionaire owner Mukesh Ambani) is mulling selling a $20 billion slice of its retail arm, or as much as 40 percent, to Amazon. The news outlet cited an unnamed source “with knowledge of the matter.”

“The deal would be a highly complementary one that builds on the strengths of either side,” Utkarsh Sinha, managing director at Bexley Advisors in Mumbai, told Bloomberg. “Amazon comes with the might of its warehousing capabilities and the ability to streamline supply chains and sweat assets for maximum returns.”

Amazon and Reliance already have some relationship in place as both are part owners in Future Group.

A significant minority ownership stake in Reliance would be a tie-up that brings together online platforms but also a brick-and-mortar presence (through Reliance) and for Amazon may also blunt some competition. Though, as we’ve chronicled in these pages, demonetization has shifted cash to the sidelines and pushed the population at large to embrace digital payments at an increasing pace since 2016, many transactions are still done face to face. Reliance Retail’s brick-and-mortar presence is broad, spanning consumer electronics, online and offline groceries and wholesale operations.

As always, should a deal materialize (and it’s not a given), antitrust and regulatory scrutiny wait in the wings.

In the meantime, the value and lure of going big in India through partnerships, an online/offline and presumably omnichannel/mobile payments strategy is being crystallized.

As reported in May, Jio Platforms — India’s largest mobile commerce company and a subsidiary of Reliance Industries — gained investments from a slew of tech-focused investors including Silver Lake Partners. Jio has nearly 400 million subscribers in India and is crafting a digital ecosystem that includes streaming media, and is eyeing payments too. Reliance, over the spring, also announced plans to debut JioMart, a pilot program for a grocery delivery service that will feature an online-to-offline ordering system on WhatsApp.

And in terms of the competition, in July news came that Walmart India Private Limited, which operates the Best Price wholesale business in India, is being acquired by Flipkart Group. The stores would operate in a manner akin to warehouse clubs, selling items to independent retailers and smaller firms (as Walmart cannot sell directly to consumers through its eponymous stores or websites). An indirect presence (in terms of reaching end customers) is still a presence.

For Amazon, the partnership/minority stake strategy may be one that relies on shared heavy lifting to capture eCommerce in a $1 trillion market. And relying at least in part on Reliance  may (or may not) go some ways toward quelling criticism in India, via an antitrust suit filed last week by a group of more than 2,000 online sellers. As reported, that suit by the All India Online Vendors Association claims that Amazon gives favorable treatment to some retailers. The suit alleged online discounts may drive independent vendors out of business.

For the U.S. tech giants eyeing India, capturing greenfield opportunities will take quite a bit of … green.