As Reliance Retail enters the e-commerce space with Reliancefreshdirect.com, existing players in the food and grocery space are gearing up to compete with the country’s largest retailer. With deeper discounts, better sourcing capabilities and brand strength of its 700-odd brick and mortar stores, Reliance may pose a major threat to its smaller rivals.

“Due to deep pockets, Reliance Retail will be able to sustain its discounts, which will be longer and heavier than most of the existing e-commerce players. It’s bound to outprice the existing e-commerce players in the food and grocery space,” says Amit Naik, co-founder of online grocery LocalBaniya.com.

Reliancefreshdirect.com recently started online and call-based food & grocery deliveries in Navi Mumbai, Thane and south Mumbai, with its direct delivery model taking on pure play e-commerce players such as Ekstop.com, BigBasket.com and LocalBaniya.com.

The company’s value formats like Reliance Fresh and Reliance Mart, along with distribution centres and warehouses, would become the servicing hubs for its direct doorstep delivery service. It would bank heavily on technology to take care of its inventories and online orders, much like the rest of the e-commerce players. However, existing food and grocery e-commerce players are not entirely convinced about the success of physical retailers in their sphere, especially in terms of balancing inventory between online and offline operations.

Discount challenge

“Apart from last-mile logistics, which is going to be a complex issue, Reliance Retail has to keep its inventories separate between its online and offline stores; or else it would cannibalise its own retail business,” says Hari Menon, CEO, BigBasket.com.

“International retailers such as Tesco have been successful because they have a dedicated inventory for e-commerce and keep their profit and loss accounts separate for both the online and offline businesses.”

For Reliance Retail, balancing an ‘omni channel’ presence would also pose a challenge in terms of discounts. “Apart from balancing inventories across the two formats, there would be a conflict when it comes to giving discounts across the formats,” says Ekstop.com co-founder and CEO Sumat Chopra.

If the discounts are more online, then it could hit sales from its brick and mortar consumers and vice-versa. “Besides, it would need a dedicated logistics and e-commerce team to make sure it succeeds in delivering on time compared to pure play e-tailers like us,” he added.

At the same time, being a grocery retailer since 2006, selling fresh produce, dairy and bakery products, staples and FMCG goods, is sure to have its advantages.

Category management

“Today, Reliance Retail understands category management, due to which it can offer faster merchandise, better pricing and improved vendor relationships unlike the new e-commerce players who may lack these skills. Ideally the company should have entered e-commerce three years ago,” says Peshwa Acharya, former Chief Marketing Officer of Reliance Retail. But Reliance Retail is keeping its e-commerce strategy close to its chest. “We have just begun our e-commerce foray and would not like to discuss our strategy at the moment,” says Damodar Mall, Chief Executive Officer-Value Format, Reliance Retail.

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