Even as Amazon has had to deal with an offline retailer — Walmart — treading on its online turf through the acquisition of Flipkart, it’s looking to hit back with some acquisitions of its own in India’s offline retail space.
Amazon is in talks to acquire a 42-49% stake in Aditya Birla Group-owned supermarket chain More, reported Mint. Amazon will tie up with India-focused private equity firm Samara Capital for the acquisition, and the deal will likely be valued between Rs. 4,200 crore and Rs. 4,400 crore. Indian laws permit foreign companies to own as much as 51% stake in multi-brand retail ventures, but Amazon, along with Samara Capital, will jointly put their funds in a shell entity, and then buy More.
This won’t be the first time that Amazon will have acquired a stake in an Indian offline retailer — last year, it had purchased a 5% stake in clothing chain Shoppers Stop for Rs. 180 crore. But Amazon’s More acquisition will likely be a controlling stake, and give the company more control as it will look to leverage its offline presence across Indian cities. More has 590 supermarkets and 23 hypermarkets in India, and its swathes of retail space could provide Amazon a launchpad to begin its offline operations in earnest.
And Amazon appears to believe that a combination of offline and online retail is how the future of shopping will play out. It had acquired grocery chain Whole Foods for $11 billion last year in its biggest ever acquisition, and since then has integrated it with its online operations. Amazon Prime members, for instance, get exclusive offers at Whole Foods, and Amazon is also experimenting with two-hour grocery delivery to nearby areas using Whole Foods stores as a hub. It’s very likely that Amazon could use More stores too for last-mile grocery delivery — More stores are already dotted around the country and stock grocery items. Amazon could use them to deliver groceries, and better compete with companies like Big Basket and Grofers.
Amazon’s courting of a retail chain isn’t unusual — it’s become clear in recent years that online and offline worlds are merging with a vengeance. Online companies are rapidly acquiring offline retailers — last year, Flipkart had acquired a phone repair services chain with stores in 100 Indian cities, and Amazon had responded by picking up a stake in Shoppers Stop. Paytm Mall too has been experimenting with offline retail, with some stores letting customers buy Red Tape shoes through its app after trying out the shoes in the store in person. Meanwhile, offline retailers have been moving in the opposite direction — the Future Group is looking to set up 10,000 members-only stores across India which will use Machine Learning and AI to recommend purchases to customers, and also let them place orders through Facebook and WhatsApp. Reliance Digital, Reliance’s retail arm, now has an online electronics store that competes directly with Flipkart and Amazon.
And Amazon, which has already pumped in $5 billion (Rs. 3 lakh crore) into its India operations, clearly thinks that the stakes have been raised after Walmart acquired its biggest online rival, Flipkart. Flipkart’s acquisition marked a grand entry for Walmart in India, and Amazon wouldn’t want to sit back and let its biggest US competitor make inroads in the country. In turn, it appears to have decided to encroach upon Walmart’s own territory — offline retail — through the More acquisition. It remains to be seen how the deal plays out, but one thing is certain — with multinational giants now sparring among themselves for India’s retail pie, the space is going to heat up like never before.