Daybreak - Reliance controls just 3 percent of India's retail market. It's still a big deal

Episode Date: August 15, 2023

Reliance controls just 3% of India’s retail market. You might think it's a tiny share. But 80% of the retail industry is unorganised. And overall, the retail sector in our country is worth nearly 900 billion dollars. So to control even 3% of it is a big deal.But it is refining and petrochemicals that is the Reliance's biggest business. Why is it then that since the last three years, Reliance Retail is being made to headline the conglomerate's annual report?Tune in.Free Read:Lenskart’s CEO and chief people officer Peyush Bansal has a people problemDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too? It's for a special announcement. For the last few months, I and Sita Ramon, Ganesh, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing and extensive post-production.

Sita and I are still reeling from the intensity of our first studio recording. Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. Reliance Retail. The last time that we spoke of it on daybreak was when I told you about its whirlwind

of a rise in the unlisted market. Unlisted markets are the kind where shares of companies that have not been listed on the stock exchange are traded. Reliance retail's shares went up from 400 per piece in 2019 to 4,000 by 2021. In just two years, they were the hottest cakes in the grey market. And there is good reason for it. Since 2020, when it got a $6 billion fundraise, Reliance's retail arm has been on an acquisition spree. It acquired sizable stakes in Just Dial and Dunso, among many others.

As of March 2022, Reliance Retail had over 18,000 stores across the country. A little less than half of these were selling geo-sim cards, handsets and accessories. But there were also more than 5,000 lifestyle outlets and over 3,000 grocery stores. I mean, just look at the scale. Reliance is also the largest in fashion and electronics. But it is refining and petrochemicals that is Reliance's biggest business. So it made sense that in its annual report for the year that ended in March 2019, retail came after the refining and petrochemicals business.

But in every year that has followed ever since, including this one, retail has come first in the annual report. Next were digital services, which includes the Telco Geo Infocom. Now, you would think that retail was first because of its growth trajectory, right? But the thing is, even now, retail is only the third largest by contribution to Reliance's profits. So why is it then that since the last three years, Reliance Retail is being made to headline the annual report? Welcome to Daybreak, a business podcast from the Ken. I'm your host Nikda Sharma and I don't chase the new cycle. Instead, thrice a week on Mondays, Wednesdays and

Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 16th of August. Reliance controls 3% of India's retail market. market. Now, you might think that's a tiny share, but you see, 80% of the retail industry in India is unorganized. And overall, the retail sector in our country is worth nearly $900 billion. So to control even 3% of it is a big deal. In a span of a year alone between December 2020 and December 2021, Reliance retail store count had expanded by more than 2,000 to over 14,000. and the area that they occupied had grown by a third to 40 million square feet. But assessing Reliance Retail is not the easiest task.

Take GeoMart, for example, which is a part of Reliance Retail. A retail analyst had told the Ken's deputy editor, Sita Raman, early last year, that there is confusion over how much of Geomart is business-to-consumer or B2C and how much of it is business to business or B2B. Since mid-2020, Reliance Industries has only reported its overall retail revenue. So it is left to analysts to make informed guesses as to how big each vertical is. In fact, the company does not even separate its core retail business, which includes electronics, groceries and fashion from its non-core segment,

which includes distributorship for geo. But with whatever we know, is there any way to find out how far can Reliance actually go? go from here. Stay tuned. My colleague Sita found a statistic in the Bernstein report that gave him a kind of a clue. He looked at the e-commerce giant Ali Baba group's share in the Chinese retail industry. It is 16 to 17%. Now, of course, we are taking into account that the market in India and China function quite differently, but Alibaba's supremacy still works as an example, because it shows us that despite all the competition that Reliance faces, it can still have an even bigger share of the retail market. So, how did Alibaba do it? It was mostly through its e-commerce business.

Reliance, meanwhile, can count on its physical footprint that is only expanding all over the country and also by being a formidable challenger to Flipkart and Amazon. But here's the most important thing that Sita pointed out, and that is, it is quite unlikely that reliance will ever be subjected to the kind of scrutiny that Ali Baba has been. In October 2020, China fined Alibaba nearly $3 billion U.S. dollars after an antitrust investigation. And this was just months after founder Jack Ma made a speech targeting Chinese regulators. Alibaba shares have lost two-thirds of their values since mass speech. Imagine what reliance can do

without these kind of obstacles in its path. Coming up next. But before that, my colleague Akshah has something to tell you. The founder and CEO of Lenskart, Piyush Bansal, has his own fan following. A part of it comes from being the judge on a very successful reality TV show like Shark Tank, but mostly from building the Lenskart empire.

Right now, the IWair retailer is one of those rare Indians. startups that is keeping its investors happy. Lenskart valued at $4.5 billion is extremely profitable. The credit for this financial success definitely belongs to Buncel. But some former employees also think that his management style is to blame for the teething people problem. That's right. Lenskart is struggling to attract and retain talent. The attrition rate for middle management was as high as 50% in 2021, according to sources inside Lenskart. Someone had to fix it and Bunsell decided this person had to be him.

He added another title to his name, Chief People Officer. But many former employees still continue to believe that his leadership style is part of the very problem he's trying to fix. Our staff writer, the Ken Ayush, confronted Buncel with these questions. And what did he say? you'll have to read the story to find out. You'll find the link in the show notes of this podcast. This story has been made available for free for exactly 24 hours. Just for today, the 16th of August.

So go ahead, give it a read and share away with your friends before the counter runs out. I'm Aksha from the Ken's Newsroom. Thank you for listening to us. If you like what we do, please subscribe, share, follow and like. And now, back to Sing The. The Ken has been covering Reliance for quite a while. now. So let me take you back to our archives from 2020. It was September and a range of investors were lining up to invest in Reliance's retail business after doing the same with geo-platforms, which

owns the telco. Here is what Sita had regained then. He'd said that what Ambani had pulled off in the last 15 years was staggering, but it was also concerning. Because what he did was he sort of used the power of his mighty balance sheet, one that came thanks to his oil refining and petrochemicals business. Ambani spent billions of dollars to reach the top of both retail and telecom. So Reliance Industries is now using its hold over these markets to raise even more capital to become this kind of a super corporation, one whose reach extends far beyond oil, telecom and retail. The kind that disrupts sectors as diverse as e-commerce, payments and entertainment. Sometimes it does this on its own and other times in partnership with its investors. And it has all the tools that are required for success in the

digital arena, abundant capital, abundant customer user data, a favorable regulatory climate, and most of all, loads and loads of ambition. Many analysts already believe that retail is reliance's most valuable business. For example, Bernstein values the retail arm at $112 billion. Now, this is a lot more than the $77 billion that it thinks Reliance's digital services are worth. For now, it seems like the more Reliance tightens its grip on India's retail industry, the more this gap will widen. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business

news platform. What you're listening to is just a small sample of our subscriber-only offerings, A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.