This is according to the Nikkei Asian Review, which reports that Amazon is near to closing a deal for a 9.5% stake in Future Retail, one of the country’s largest store chains. Key to the deal is the reported agreement of an option for Amazon to buy out Future Retail over a period of eight to ten years.
Future Retail currently operates several brands with an enormous footprint: over 1000 stores in 250 cities with an annual customer base of 500 million across India.
It is not the first physical investment that Amazon has made in India’s physical retail space. In September 2017, amazon bought a 5% stake in Shoppers Stop, as well as a stake in Aditya Birla group’s More supermarket chain.
Livemint writes that the Future Retail deal will give Amazon a head start in the offline space as a challenge to Walmart’s presence through Flipkart. Flipkart currently doesn’t operate any physical stores but is said to be expanding its cash-and-carry business aggressively.
“It gives Amazon a head start in physical outlets compared to Flipkart. While Flipkart doesn’t have any stores right now, Walmart has a store-based wholesale business that is growing”, says Euromonitor International’s head of retailing, Michelle Grant, in comments to Livemint.
“It’s only a matter of time before Walmart uses its local and global expertise in store-based retailing to open stores in India. Amazon is getting ahead of that, while Walmart deals with the transition of owning Flipkart,” she added.
In May, Walmart acquired 77% of the e-commerce business Flipkart for $16 billion. Both Amazon and Walmart are now pursuing a combined online offline strategy as online retail only accounts for 3% of the total Indian retail market, according to Forrester Research senior forecast analyst Satish Meena. Merging online and offline retail, he adds, is especially important in the grocery market, “they need to be offline to deliver this to customers.”
For many Indian customers, writes the Nikkei Asian Review, shopping is often a family experience, and customers like to touch and feel products before making a purchase.
Elsewhere in the market, the move to combine online and offline suggests the strategy is believed to be core to growth. Reliance Jio, the telecom group, is currently working on a platform to connect broadband customers to mom-and-pop stores; Paytm Mall is also working on the idea for a browsable in-store catalogue from which customers can either buy there and then in store, or arrange for same-day delivery.
Sourced from Nikkei Asian Review, Livemint; additional content by WARC staff