Pandemic becomes perfect opportunity for Amazon and Reliance to battle each other

The Indian retail landscape bears a striking resemblance, if only metaphorical, to a scene in the shark documentary, Air Jaws, where several great white sharks thrash about while ripping off huge chunks of flesh from a whale carcass.

India is that succulent carcass while one of the great whites is Reliance Retail, which is owned by Mukesh Ambani, a hard-charging Indian tycoon who inherited an oil and gas empire two decades ago, leveraging it into monopolising and monetising as many Indians' wallets and eyeballs as possible.

The first part of his grand plan was to start a telecom company. Ambani did that by decimating a diverse and promising telecom landscape of 11 or 12 players into an arid, debt-laden collection of three today, the third being his telecom outfit Jio.

The other part of the plan has been transforming Reliance's existing retail outfit -- the largest chain in India with around 10,400 physical stores in more than 6,500 cities and towns -- to a sprawl so vast, varied, and digitally interconnected that few entities will stand a chance in taking on Ambani. Except, of course, for Jeff Bezos. 

There's also another shark, Walmart-Flipkart, which has deep pockets and a pan-India footprint, but it hasn't made many attention-grabbing moves as yet, so we'll leave them out of the picture for now.

See also: Flipkart acquires Walmart India to launch wholesale digital marketplace

Having missed out on China -- as Amazon simply couldn't compete with the super-agile local businesses who could deliver packages almost instantly -- India is pretty much do-or-die for Amazon now. 

So far, the Amazon-Reliance heavyweight bout has followed a punch-counterpunch pattern. When Amazon launched Amazon Pharmacy at the start of the month, which distributes both over-the-counter and prescription medication among other things, lo and behold, Reliance a few days later announced it would acquire a similar outfit called Netmeds. 

Meanwhile, in the retail grocery segment, dominated by local online stalwarts Bigbasket and Grofers, the fight is only just beginning. Groceries comprise 55% of all retail sales in India and is substantially disaggregated and, therefore, eminently disruptable.

Amazon, as you can imagine, is very capable in this space. It pretty much invented the online retail game and has become the global benchmark when it comes to designing and operating a retail backend, logistics network, and delivery model. In India, it has already set up Amazon Pantry and Amazon Fresh -- for groceries and produce, respectively -- and, in a pioneering move, is also testing farm-to-table fruit and vegetable deliveries in Pune, Maharashtra.

Ambani, meanwhile, has a large digital pipeline as well as an existing retail empire. His response of using both in tackling the retail grocery segment has been a masterstroke. Reliance, earlier this year, launched JioMart to target the groceries market. 

It has also installed SMART point terminals in neighbourhood grocery stores across 200 cities to allow his company to source and sell groceries via neighbourhood kirana stores. When an order is placed by a consumer, JioMart's role is to ensure that it is ready in the local grocery store for pickup.

What makes this a fitting response to Amazon's grocery activities has been an accompanying deal, forged with Facebook's WhatsApp, that allows a business to list its products or a consumer to purchase and pick up grocery shopping via the messaging platform. This is done by using a JioMart number listed on WhatsApp.

If the user happens to be a Jio telecom customer -- a one in three chance right now -- then Reliance effectively captures every phase of the transaction and can mine all that valuable data while doing so.

For both Amazon and Reliance, watching each other's moves will become second nature from now on, judging by the laundry list of their plans. 

Reliance says it intends to expand its JioMart-to-kirana-via-WhatsApp-through-Jio pipeline of products into both fashion and electronics.

It has also been busy negotiating acquisitions of online furniture maker Urban Ladder and lingerie maker Zivame, so expect major announcements there soon. Reliance, like any self-respecting super app, is also planning to sell things like insurance, brokerage services, and mutual funds through its pipeline of products.

Amazon, for its part, is piloting a restaurant delivery service as well as a wealth management service, and has already started hawking car and motorbike insurance.

Meanwhile, the pandemic has boosted digital properties and shackled the supply chains of conventional retailers, which both work perfectly in Ambani's favour.

See also: Reliance Jio sees 2020 net profit jump by 88%

Where things have taken both a fascinating and peculiar twist, however, has been Reliance's chase of one of India's largest retail groups, Future Retail, founded by Kishore Biyani, 

Reliance has been salivating at the prospect of buying Future Retail Group primarily because of the allure of owning its subsidiary, Big Bazaar -- the largest, nationwide grocery chain in India. Once it was known that Biyani's company stood to default on a ₹100 crore ($14 million) repayment on $500-million foreign currency bonds, Ambani pounced.

But here's the rub. Presently, Amazon has a 3.5-4% stake in the Future Group, which it purchased for $100 million last year via Future Coupons. It also has an option to bump that stake up later. Not exactly a window-rattling move.

Where it gets interesting though is that Amazon was also savvy enough -- or just fortunate -- to ensure that it held the legal rights to intervene in any stake sale entertained by Future Retail Group.

So now, as Ambani tries to hammer out a deal with the Future Group, Amazon is said to be pressing for a 9.9% stake in Reliance while Ambani wants to restrict it to just a few percent.

Now, Ambani has been keen to sell parts of his new empire to pare debt. In fact, he has raised a cool $22 billion by flogging a 33% stake in his digital venture to Facebook and Google amongst others recently, valuing Jio at $58 billion.

But I can bet that selling a piece to Amazon was not part of his plan. How Amazon, as a potential investor, would piggyback on Reliance's JioMart, as is the rumoured intention, while fighting Reliance tooth-and-nail in the retail sphere, is something to look out for, and something that would be far more entertaining than any show on Amazon Prime.

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