At a nominal GDP growth rate of over 13% between 2015 and 2018 and projected at about 11% between 2018 and 2025, India is expected to become a $4.5-trillion economy by 2023 and about $5.5 trillion by 2025, up from about $2.8 trillion in 2018. In 2018, India’s private consumption was about $1.6 trillion of which merchandise (retail) consumption was about $765 billion. By 2025, private consumption is expected to grow to about $3 trillion of which merchandise consumption will be about $1.5 trillion. Of the merchandise retail market in 2018, only about 10% (i.e. about $77 billion) is accounted for by modern, organised retail. E-tail accounted for about 3% (i.e. about $22 billion) in 2018. By 2025, organised brick-and-mortar retail is expected to be about 17% (i.e. about $250 billion) of the total retail market and e-tailanother 7-8% (i.e. about $100-$125 billion). Indian organised retail businesses are currently valued at 3x-4x of one-year forward revenues, and if this trend holds, then India’s organised retail sector (both physical as well as e-tail) is likely to create an additional $800 billion-$1 trillion of valuation for investors in such businesses.

With these numbers, it is no surprise that Walmart found it prudent to pay nearly $16 billion for a significant majority stake in Flipkart, valuing the business at nearly $20 billion (estimated gross merchandise value at Flipkart in 2018 was about $6 billion). Another homegrown relatively large format value retailer D’Mart (parent: Avenue Super-markets) closed 2018-19 at about $3.3 billion in revenues and enjoys a very rich market capitalisation of almost $12 billion. Venture capital and private equity, therefore, continue to flow into India’s retail and consumer businesses in increasing billions of dollars, year after year.

With this background, it is very clear as to why Reliance Industries has such a strong interest in the retail business. Its first retail stores were launched in 2007 (multiple formats, addressing nearly all major consumer product categories). It closed 2018-19 with revenues of about $18 billion (and Ebitda of about $265 million). As of March 31, 2019, it operated about 2.2 million square metres of retail space, across over 10,000 retail stores, spread across 6,600 cities and towns in India. Of these revenues, e-tail accounted for a negligible share. The retail business has been growing at upwards of 35% CAGR even at this relatively high base and by itself, it should, therefore, touch $75-$100 billion in annual revenues by 2025.

However, Reliance’s bigger retail vision is beginning to unfold only now. To start with, Reliance is the only large global retailer that is also one of the largest telecom operators in the world and at about 300 million-plus subscribers, the second-largest in India. By 2020, it is very likely to become the largest telecom operator in India with over 400 million subscribers with most of them using a smartphone and having 4G access to extremely low-priced data.

On the ecosystem side, Reliance has been putting together (organically and through acquisitions) an incredible suite of technology (including AI, haptics, voice recognition, AR, and VR) and an equally incredible suite of consumer-focussed products and services that include music and entertainment, financial products including insurance, and education. Healthcare should follow soon. With an expected 400 million (by 2020) nearly captive users of its telecom platform Jio, Reliance will have an incredible advantage over all its rivals who have to put in mega efforts and megabucks to have potential customers download their own apps and then to incentivise them to use them frequently.

Reliance has now embarked to launch a unique physical-digital retail business platform that is already being piloted across India and is expected to be rolled out nationally in the coming years. The big plan is to enlist as many as 8-9 million (out of about 22 million)independent retail outlets (mom-and-pop variety) to become an integral part of Reliance’s retail ecosystem. With a purpose-built multi-functional POS (point of sale) system being at the heart of this initiative, each of these 8-9 million independent retail outlets is expected to be networked with Reliance’s overall retail enterprise. This will allow these retail outlets to gradually shift a substantial part of their own buying through Reliance’s B2B retail platform (fulfilled by Reliance-owned supply chains, distribution centres, and logistics).

In addition, most of these Reliance enlisted retail outlets are expected to fulfil the role of millions of “spokes” from which the last-mile delivery of merchandise (and returns) can be effected for Reliance Retail’s B2C e-tail platform. If successfully executed (a daunting task), Reliance will not only become (by far) the largest B2B retail business in India but also the lowest cost B2C e-tail business (when factoring in the cost of deliveries to and returns from consumers).

Amazon, Walmart, and Metro Cash & Carry are obviously taking their own steps to create a similar B2B business by enlisting India’s millions of independent retailers but how far they will succeed remains to be seen.

With this “omnipresent” retail vision of Reliance—in which Indian consumers can do just about everything that can currently be done either through a physical retail model or through a digital one, and then can also get entertained, carry out payments, buy financial products, access education-oriented products, and in future, also access healthcare—will perhaps present a unique business model that will be hard to emulate not only by other retail players in India but even by some of the most successful retail businesses anywhere in the world.

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