US e-commerce giant has been on a roll in India.
Days after a rumored venture into food delivery and an announcement of its largest global campus in the south Indian city of Hyderabad, regulatory filing on Thursday evening shows that the company is indirectly acquiring a minority stake in Future Retail by shelling out for 49% stake in Future Coupons, a group entity owned by the retailer.
Future Coupons held warrants that convert to a 7.3% stake in Future Retail, hence snatching almost half of the former will give Amazon a 3.58% stake in Future Retail. In addition, the deal also gives Amazon the option to buy all or part of Future Coupons’ s shareholdings in Future Retail after three years.
Previous local media reports claimed that Amazon is looking to acquire no more than 25% stake in Reliance Retail, India’s largest retail chain, but the deal seemingly fell through and Amazon turned to Future Retail.
Writing the cheque will give Amazon its long-coveted access to the Indian traditional retail market through Future Retail, India’s second-largest retail chain.
“E-commerce is a very, very small portion of total retail consumption in India, probably less than 3%,” according to Amazon India’s head Amit Agarwal. Brick-and-mortar stores are still quite relevant in the country.
Amazon also owns a stake in the Indian supermarket chain More, and department store chain Shopper’s Stop.
Mumbai-headquartered Future Retail has a presence in more than 400 Indian cities and operates more than 2,000 stores of various types, from BigBazzar the hypermarket to EasyDay and Nilgiris the supermarket chains.
“This investment reflects our commitment to innovate for Indian customers and offer best-in-class shopping experience. This investment provides an opportunity for us to learn global trends in digital payments solutions and launch new products,” a Future Group spokesperson said.
Indian’s offline grocery market is also a big draw for the deal.
Investment bank CLSA says Indians spend around USD 500 billion every year but online segment’s penetration in the market is only 1%. The banking institution expects online grocery to become the largest driving force in e-commerce development in the country in the next decade.
Future Retail through its various retail chains owns about a third of India’s organized food and grocery market.
On a separate note, Amazon on Thursday said it would launch Amazon Fresh its online grocery delivery service in India. The service will available in Bangalore the IT capital of India first before a wider rollout to the country’s other metropolises, including Mumbai, Delhi/NCR, and Hyderabad.
Currently, Amazon Fresh offers 5,000 kinds of goods, ranging from fresh fruits and vegetables, dairy and meat to home and personal care products. The service will deliver groceries within two hours from 6 AM to midnight.
“With Amazon Fresh, customers can experience the convenience and speed of ordering daily essentials on Amazon.in. Now, customers can order the freshest fruits and vegetables as well as everyday grocery and get it within two hours,” a company executive said as quoted by local media.
In addition to curating its own selection, the company will also onboard hyperlocal deliveries from stores onto its platform.
The online food and grocery market in India is currently led by the Grofers and BigBasket, which recently raised a new USD 14 million financing round.
The focus in e-commerce in India is shifting from traditional items like electronic devices and personal care products to grocery, which begets high-frequency repetitive buys.
With a growing online and offline retail market, owing to its economic development and urbanization, the world’s second-largest populous country becomes the new battleground for two American retail giants: Amazon the e-tailing behemoth and Walmart the big-box shopping center mammoth.
Amazon has entangled in an escalating battle with Flipkart, which was acquired by Walmart for 16 billion dollars, in India. On the other hand, Amazon has invested more than USD 5 billion in the first five years of its operation in India with another 2 billion to be spent.