Reliance AGM: Silicon Valley has given billions to Mukesh Ambani, but not everything goes according to plan

The investments quickly established Mukesh Ambani, the billionaire at the head of the sprawling Indian conglomerate Reliance, as the keeper of Silicon Valley in the country – but also raised the stakes for him to provide businesses with a base in the internet market. fastest growing in the world.
Ambani plans to use Facebook (FB) messaging service, WhatsApp, to connect millions of small businesses in India to its e-commerce initiative, JioMart. The partnership with Google (GOOGL), meanwhile, aims to jointly develop an affordable 5G smartphone.

Reliance, whose main businesses include energy and retail in addition to technology, is expected to provide an update on these initiatives at its annual meeting of shareholders on Thursday, along with an ambitious plan to expand the 5G network. from India.

But as India continues to grapple with the impact of the coronavirus pandemic, including an economic slump, Jio’s plans could face more headwinds than his politically connected billionaire owner is used to.

Smartphones are fighting

Selling smartphones in India can be a difficult business even under normal circumstances. Average Indian earns around $ 2,000 a year, according to latest World Bank The data, manufacturing expensive smartphones out of reach for most of the country. Apple has struggled to sell iPhones there for years, and Samsung is losing ground to cheaper Chinese brands like Xiaomi, Oppo, and Vivo.
But that challenge has only been exacerbated by the global pandemic, which has overwhelmed supply chains and caused shortages of key components. As a result, building a cheap smartphone has become more difficult.

“Supply constraints impact almost everyone in the industry, but the impact on small, local players is even greater because they are not really the top priority for component manufacturers,” he said. said Kiranjeet Kaur, analyst at research firm IDC. Although Jio has enormous resources, he is still relatively new to smartphone gaming, “and the emphasis on the low-end makes it even more difficult to buy parts, she added.

Jio has had to dramatically downgrade its sales targets for the smartphone due to shortages and rising prices, according to a recent report from Bloomberg.
Delays in smartphone deployment could hurt Google’s efforts to capture the Internet user base in India, which already numbers over 700 million and is expected to grow rapidly over the next few years.

A spokesperson for Jio declined to comment on his plans to release and sell the smartphone, but acknowledged that the pandemic could impact the timing of its deployment. Google did not respond to requests for comment.

India’s protracted Covid outbreak and the resulting economic crash have also hampered the ability of consumers to upgrade their devices, according to Tarun Pathak, director of research for mobile devices at Counterpoint Research. This makes the country’s smartphone market even more price sensitive at a time when it becomes more and more expensive to manufacture.

“This is where we see challenges for someone like Jio.… Every penny counts,” he said.

An uphill battle to build an e-commerce empire

Facebook’s $ 5.7 billion investment in Jio – one of the largest ever by the American company – is a marriage of convenience between two services that form the backbone of the Indian Internet. Facebook-owned Jio and WhatsApp each have over 400 million users in India, and the partnership between them is part of an effort to dethrone Amazon and Walmart at the top of India’s online retail market. .

JioMart, Reliance’s e-commerce platform, aims to do just that by bringing millions of Indian mom and dad stores online. Launched months before Facebook’s big investment, JioMart now operates in more than 200 Indian cities.

Despite growing over the past year, analysts say JioMart is struggling to convince local retailers to sign up. Its direct-to-consumer delivery service “is slowly picking up amid retail apprehensions,” according to a report from Indian brokerage Kotak Securities earlier this year.

“Integrating independent traders has been a challenge since many [them] are wary of sharing their business information, and many are still unclear on the value proposition from their perspective, ”said Arvind Singhal, chairman of Indian consultancy Technopak.

Why Amazon and Reliance clash in India over cash-strapped chain of stores
WhatsApp faces its own challenges in India. After a long delay in obtaining regulatory approval for its payment system in the country, the courier service is now sue indian government on new rules that would force him to break the encryption. The rules and the resulting lawsuit cast a shadow over WhatsApp in its largest market.
Ambani’s battle with Amazon also went to court, the US tech giant challenging Reliance’s recent acquisition of rival retailer Future Group. The legal battle is expected to drag on for months, further slowing JioMart’s growth prospects.

“It’s probably true that progress in executing this vision has not been in line with Reliance’s initial expectations, but it would have been a miracle if everything had gone according to plan,” Singhal said. “Reliance is known to adapt very quickly [and] course correction, and so it is still very likely that JioMart will achieve its original goals. ”

– Diksha Madhok contributed to this report.

Source link

About Dwaine Pinson

Check Also

Adam Rosendorff, former director of the Theranos laboratory, testifies on the “pressure”

Elizabeth Holmes, founder of Theranos Inc., left, arrives at federal court in San Jose, Calif., …

Leave a Reply

Your email address will not be published. Required fields are marked *