India is one of the world’s fastest-growing retail markets in the world, with estimated market size of USD 1.2 trillion by 2021, a big jump from 2017’s 795 billion, per a report by Deloitte India and Retail Association of India. However, the country’s offline businesses are mostly consisting of the traditional, small-scale, such as mom-and-pop groceries, and unorganized ones, speaking to huge opportunities in the sector.
U.S. e-commerce giant Amazon and local retailer The Future Group are reportedly in advanced talks to strike a deal that will see Amazon pick up 10% stake in the latter, the third-largest retailer in India, to jointly tap further into India’s offline sector.
The talk first emerged in last May. Though a spanner in the discussions appeared after the Indian government implemented new foreign direct investment rules for e-commerce players. Amazon then suspended the talks, only to revive it now after a way around the rules surfaced.
Amazon seeks to get a substantial lead in both online and offline grocery retailing in India, and the potential deal with The Future Group which operates its flagship “Big Bazaar” grocery store chain is one critical piece of the puzzle. The two entities have discussed plans about distribution, warehousing and creating exclusive products for Amazon’s marketplace and its grocery offerings Pantry and Amazon Now.
Future Retail operates over 2,000 stores across 400 Indian cities and owns brands like Big Bazaar, Easyday, Foodhall, HyperCity, FBB, Heritage fresh, ezone, and WH Smith.
Amazon’s venture from online to offline territory in India is more than just a whim. In a similar experiment in its home turf, the e-tailing behemoth acquired premium grocery store chain Whole Foods for USD 13.7 billion in 2017, to get a toehold in the 840 billion dollar U.S. grocery industry. However, Whole Foods has been struggling to survive according to a report by Bloomberg.
The home market fiasco is not deterring Amazon from making a similar foray in the world’s second-most populous country, where, according to Morgan Stanley, e-commerce still contributes to just 2% of total retail sales. More revenue is still coming from old-fashioned traditional channels.
Amazon had earlier acquired minor stakes in other Indian brick-and-mortar chains such as lifestyle retailer ‘Shoppers Stop’ and ‘More’ a grocery chain from the Aditya Birla Group over the last few years. Shoppers Stop has a network of 80 departmental stores whereas More runs 523 supermarkets and 20 hypermarkets.
Amazon’s local nemesis, Flipkart, was also mulling to enter India’s online grocery business and also was in talks with Namdhari’s Fresh, to buy Namdhari’s 30 physical stores in Bangalore but nothing materialized yet.
