Guess who looks more like a global, octopus-like Amazon in India? (Hint: It isn't Amazon)

E-commerce giants like Amazon and Flipkart may soon not be able to compete with Reliance's interlocking new-era businesses. However, for that to happen, Reliance will need to think and act like a firm that genuinely innovates.

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Imagine an Amazon that, in addition to being the largest online shop in North America, was also the largest telecom company, the largest bricks-and-mortar retail chain, the biggest high-bandwidth cable outfit, and one of the largest digital media and entertainment companies with stakes in film, television channels, cricket teams, and influential newspapers and magazines.

Pretty incredible, right? For now, let's just assume that being such a fantastically interlocking monopolistic-looking enterprise is good for any economy.

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This is what Reliance Industries is rapidly morphing itself into -- a once textiles and petroleum behemoth that has tacked on all-of-the-below to its business model: Reliance Jio, the largest telecom company in India at 275 million customers and growing; JioGigaFiber, the largest broadband provider at 50 million customers and growing; TV stations and digital news including CNBC TV18, CNN-IBN, CNN Awaz, Money Control, Forbes India, and India Today; and a web of 10,000 of its own stores nationwide that includes 5,500 Jio telecom touchpoints, its Reliance Retail enterprise that has 9,156 stores in 5,800 cities with total revenues of almost $7 billion and estimated growth of up to $138 billion in the next 10 years, the fast growing fashion brand Reliance Trends, the consumer electronics chain Reliance Digital, and well-established grocery chain Reliance Fresh, which is slated to play a part in Reliance's online grocery play. 

Phew!

If research outfit CLSA's estimates were to come true, Reliance Retail alone would make over a quarter of all of India's revenue from retail -- both online and offline -- in India, which is expected to be around $550 billion, over the next decade. At this rate, don't rule out shuttle services to the moon for the upper middle class or flying electric ice cream vans offering door-to-door service.

India is a very different world from just a few years ago, as Amazon and Flipkart are no longer the only players in the e-commerce game. The dizzy euphoria of Amazon's $5 billion plus investments into operations in India and Walmart's $17 billion plus acquisition of Flipkart in 2018 no longer possess the same lustre, with both of them currently being in precarious positions. And things have only gotten considerably worse for the foreign online players after the BJP government, post its defeat in three important local elections in December, decided to enforce its 2016 e-commerce rules to appease its votebank of shopkeepers and tradespeople.

These rules disallow both entities from holding inventory, taking away what has always been Amazon's cutting edge competitive advantage -- a globally tested and vaunted logistics enterprise that no one else could compete with. Also, the new rules dictate that e-commerce companies are not allowed to source more than 25 percent from any one supplier, therefore preventing companies from becoming ad hoc self-suppliers of products which would make logistics and quality control much easier. Also, neither Amazon nor Flipkart are allowed to fold a stake in any supplier of goods. 

Behind the scenes, Reliance has rejoiced at these changes and viewed them as signals to enter the e-commerce game. As of late, Reliance has engineered various masterstrokes such as convincing the Indian government through intense lobbying that foreign outfits should not be allowed to store their data outside of India, in addition to influencing government to put the choke on its foreign competitors via the new e-commerce rules.

But it gets much worse for Flipkart and Amazon. Mukesh Ambani's grand vision for Reliance doesn't just stop at the universe described in above paragraphs. His latest scheme, announced at the end of January, is an e-commerce platform for 1.2 million small retailers and shopkeepers in his western-Indian, hometown state of Gujarat. In a country where only a quarter of the population have smartphones -- out of a population of 1.3 billion -- and where households in smaller cities and towns rely on neighborhood grocery stores for their package deliveries, phone top-ups, and purchases ranging from groceries to badminton rackets, you can imagine Ambani's reach if the company is able to connect all 12 million of the country's small and medium-sized shops to his enterprises with Jio as the lynchpin behind it all.

If Ambani's ambition bears fruit, when Indian consumers purchase smartphones, data top-ups, vegetables and soap, fashionable clothes, movies and even the daily news, it will most likely be an Ambani-linked product that is arriving at your doorstep, smartphone, or TV courtesy of an Ambani logistics and supply chain backbone as well as a cable or smartphone pipe.

If this makes you involuntarily blurt out big brother, well there's probably no other more suitable term considering Mukesh has emerged as the clear winner over his younger brother Anil Ambani. Both helped their father Dhirubhai Ambani, perhaps India's most legendary businessman, grow his empire as young executives but then became embroiled in a bitter feud for his empire when their old man passed away without a will. Mother Kokila became the arbiter, with Mukesh inheriting his father's textiles-to-petroleum fortune and then using it to raise $40 billion of leverage to graft an entirely 'new-economy' side to it in a bold and expensive gambit. His younger brother, Anil, meanwhile inherited a nascent telecom empire, in addition to finance, to which he added a power and energy division. Anil has since ran all of them to the ground, reducing his $30 billion fortune to a paltry $300 million in just 10 years. A breathtaking feat of collapse if there ever was one.


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CAVEATS

Before Mukesh can break out the bubbly, however, there are still many hurdles ahead of him. To really win the new economy game, Reliance will need to exhibit a culture of cutting-edge innovation, like, say, a Tencent, which it is not yet known for. New economy businesses require entrepreneurs from new economy wombs to think, act, and breathe in the language and neural makeup of this new world, a world that old economy Reliance is far from embodying or engendering.

Then, there's the synergy element -- all parts of the whole company need to be firing on all cylinders, and effortlessly so, for the grand vision to work, which is not the easiest thing considering the size of the enterprise. Also, his chief competitors Amazon and Walmart (via Flipkart) have considerable experience and competitive advantages, which are crucial to new-era businesses. Amazon is a world leader in technology both on the consumer facing front and in the enterprise space. Walmart, meanwhile, is an expert on how to keep supply chains humming with efficiency.

Plus, Reliance has gotten to where it is now because of its vast pool of cash -- its ability to use the endlessly profitable petroleum operations to raise debt for its newer forays such as telecom. How long will Reliance be able to continue doing thos? "Replicating success in the e-commerce world will take some sharp learning and a lot of spending," Vidhya Shankar said, executive director at advisory firm Grant Thornton in Quartz. 

Now that, of course, is something Mukesh Ambani is not at all averse to doing. The question is what will happen when the golden goose stops laying its eggs? By then, Reliance's new businesses would have to be solidly profitable rather than a fanciful bet on the future.

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