Local vendors are solidly behind this policy change as they hope to regain lost ground without having to lose more money by offering discounts. The new rules will definitely boost sales for offline vendors with market research agency CRISIL expecting revenues to grow between USD 100 billion to USD 120 billion within the next 12-15 months.
However, it would be the larger players who make much more significant gains. So, with its huge chain of organized retail, the bigger companies such as Reliance, Big Bazaar etc. would be the ones truly laughing their way to the bank. Since Reliance has leapfrogged over all the others in organized retail across products and brands, the Mukesh Ambani-led Reliance making the biggest profits would be a no-brainer.
There is also another obvious connect. Estimates from CRISIL suggest that electronics and apparel would contribute to the biggest losses for e-commerce players in the new regime. Is it a coincidence that Reliance Retail posts more than one-third of its revenues from these two segments? The company also holds the biggest bouquet of brand associations for the apparel segment in India.
The company currently boasts more than 9000 retail stores across close to 6,000 locations in India offering hundreds upon hundreds of brands to its offline customers. Of late, the company has launched several online brands for its retail segment and it would be only a matter of time that they consolidate varied brands under a single umbrella.
The timing of the move is explained by a recent market estimate done by PricewaterhouseCoopers that suggested Indian retail market to be in the realm of USD 150 billion within the next three years. With online accounting for just about 3% of this market, the headroom is really massive for Indian eCommerce players to make hay.
Where does the change in policy leave players like Amazon that has invested close to USD 5 billion in India or Walmart which paid three times this amount to acquire controlling stakes in Flipkart? One may argue that the rule changes provide a field that is more level than it was for the Indian companies. A contrarian view may be that course-correction mid-stream may confuse potential investors of India’s economic policy – there are already murmurs about such moves curtailing actual FDI flow into the country.
Beyond the policy issues and foreign players, how would this move affect the retail consumer? That is, would we have to pay more for goods we buy online in the absence of deep discounts? Only time will tell. The nay-sayers may argue that we are going back to the good old days where one had to wait six months and pay a premium to own a Bajaj scooter. The optimists might argue that Mukesh Ambani can well do another Reliance Jio in the retail space and make the atmosphere conducive for online retail to spread far and wide.
Remember, Reliance offers mobile internet almost free of cost! Getting users to buy stuff online would be the natural concomitant to this largesse.―Yahoo News