Facebook bets on a different sort of e-commerce in India
April 25, 2020
Summary – The article talks about Reliance one of the biggest conglomerates in India, a few months back there was talk of Aramco buying a 20% share in Reliance’s oil business. But the deal got off because of the sudden crash in the oil market and the current pandemic, in which its share fell by 40%. Reliance already had some debt and the deal would have helped, but thankfully Facebook jumped in at the last moment to enter into an alliance with Reliance, purchasing 9.9% share of Reliance Jio. Both the companies can profit from this, reliance needed some fresh funds and Facebook had hordes of cash which it now has placed in a prospective market. Reliance is a big conglomerate, it has presence in various industries/sector in India and holds a dominant position in the Indian market, with Jio it has the capability to provide internet and network connection to millions of its user and, through its 11,300 stores commercial spread across the country it has the ability to provide essentials to individual households easily. As for Facebook it too has a widespread reach over the Indian community through their WhatsApp app, more than 400 million people use WhatsApp to communicate, and recently after a lot of struggle they got the permission to handle payments over their platform in India. With Reliance and Facebook teaming up they can connect the dots between the individual pieces that they each hold and create a new platform / provide a new service which will give a tough competition to Amazon and Flipkart (Owned by Walmart).
Opinion – Reliance does hold a dominant position in the Indian market, through its various different industries it performs and provide a wide range of service across the country. With its telecom service Jio which came out some 5-6 years back and since it has rattled the telecom industry in India. It really shook things up, before Jio call prices and internet services (5GB) were provided at INR 550 and call rates were sky high too, Jio started its service by providing its users free call, network and Internet services (3GB) per day. This attracted a lot of customers which left their previous provider without a second thought and since Reliance was already a household name as it provided several other services people had trust in them. Their low prices forced all the other network provides to slash and bring their previous plans from INR 550 to INR 50. People flocked to Jio and the best part, it gained customers which previously didn’t use telecom services, since it stated providing at zero total costs a lot of new customers joined. They gained a lot of good will from the people; they were really happy with this move. This move did cost them money and they went under some debt through various loans, and needed some relief. Facebook on the other hand after purchasing WhatsApp had a vast reach to the Indian public as after texting the next platform that most of the public switched to was WhatsApp. Their alliance together could really shape the business model of Reliance which it currently has, it will gain direct reach to customers who will be able to place orders and make payments remotely and this will give tough competition to other online retail providers such as Amazon and Flipkart.