Markets

Tough Times Ahead for Amazon as India's Richest Man Sets Sight on E-Commerce Supremacy

The world's richest man -- Jeff Bezos -- is locked in an intense battle with India's richest man -- Mukesh Ambani -- over the country's bustling e-commerce market. While Bezos' Amazon (NASDAQ: AMZN) has cornered a substantial share of India's e-commerce space since its entry in 2013, Ambani's new online platform, JioMart, is scaling up at a tremendous pace.

And now JioMart parent Reliance Retail is taking another step to take the fight to Amazon with its latest purchase.

Reliance is going toe-to-toe with Amazon in India

Amazon recently launched an online pharmacy service in India to tap into a hot growth segment that has gained traction in the wake of the COVID-19-induced lockdown in the country. The e-commerce giant is testing the concept in the south Indian city of Bengaluru at present and is likely to expand the test to other cities as well.

The Indian flag and e-commerce represented as keyboard buttons.

Image source: Getty Images.

Amazon's jump into this space isn't surprising, as India's digital health space is expected to clock $4.5 billion in revenue in the ongoing fiscal year ending in March next year, according to RedSeer Consulting. That would be a big jump from last year's revenue of $1.2 billion. What's more, the consulting firm anticipates that the market could be worth $25 billion in the next five years, and Amazon didn't want to miss out on this lucrative opportunity.

But Ambani's Reliance Retail didn't want to be left behind. The conglomerate's retail arm has paid 620 crore Indian rupees (roughly $83 million at the current exchange rate) for a 60% stake in Vitalic Health, which operates online pharmacy Netmeds in India. Vitalic has been in the business of pharma sales and distribution in India for five years now, and it has been operating Netmeds for a similar time frame now.

More importantly, Netmeds has been growing at an impressive pace. The company reportedly tripled its growth in the fiscal year that ended in March 2019 last year, and it is one of the four major players in India's online pharmacy space, which together account for 90% of sales.

So Reliance Retail could get a head start in online pharmacy by clubbing Netmeds' existing operations with its massive network of physical stores and the fast-growing JioMart e-commerce platform. But this isn't the only area where Reliance is looking to take the game to Amazon.

Ambani is about to turn up the heat

Citing sources familiar with the matter, Indian financial daily Mint reports that Reliance Retail is about to go on a buying spree to bolster its e-commerce business in India. The potential acquisitions are expected to strengthen Reliance's online presence in furniture, intimate wear, and groceries. The company is expected to pay a combined $190 million for Urban Ladder (online furniture) and Zivame (innerwear).

This shopping spree could help Reliance Retail make a bigger dent in India's e-commerce market, as the JioMart platform has been expanding its reach at an impressive pace. JioMart is operating in more than 200 cities, and the app had crossed 1 million downloads by the end of July. Not surprisingly, the platform scaled up its daily orders from 250,000 to 400,000 in the space of just two weeks.

Indian brokerage firm IIFL Securities predicts that JioMart could hit 4,000 crore rupees (roughly $534 million at the current exchange rate) in its first year of operation. Amazon generated just over 11,200 crore rupees as revenue from India last fiscal year, and it has been operating there for seven years. JioMart would do well to achieve more than a third of that in just the first year.

Mukesh Ambani has raised more than $20 billion in the past few months for his digital business and is now looking to use the money at his disposal to strengthen JioMart's e-commerce standing in India. The numbers that are available in the public domain indicate that Ambani's initial moves have worked out well, and the company has been able to stake its claim in online groceries.

Morgan Stanley predicts that JioMart could corner half of India's online grocery market in the coming years, but the company's designs extend beyond that. Ambani recently said that he plans to expand into electronics, pharma, fashion, and healthcare as well. So it wouldn't be surprising to see Reliance buy more companies to strengthen its e-commerce presence and make life difficult for Amazon in India's retail industry.

10 stocks we like better than Amazon
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and Amazon wasn't one of them! That's right -- they think these 10 stocks are even better buys.

See the 10 stocks

 

*Stock Advisor returns as of August 1, 2020

 

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story

AMZN

Latest Markets Videos

The Motley Fool

Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

Learn More