After failing to crack the deal with Indian ecommerce giant Flipkart, US-based retail giant Amazon is said to be in talks with India’s largest brick-and-mortar retail company Future Retail, to acquire a stake.
Future Retail, which is the retail arm of Kishore Biyani-led retail and FMCG giant Future Group, owns physical retail stores such as Big Bazaar and Easy Day.
This development was first reported by FactorDaily, which quoted sources as saying that Amazon is looking to pump in roughly $600 million for a 10% stake in the company.
While Future Group denied commenting on the speculation, sources have told The News Minute that Kishore Biyani and Jeff Bezos did meet earlier this year to explore a possible deal.
Biyani visited Seattle around January or February to meet with Jeff Bezos, post which executives from Seattle came down to Mumbai to meet with Kishore Biyani and his team. However, discussions had been put on hold after that.
Both companies seemingly wanted to wait till the Walmart-Flipkart deal was announced and then take things forward.
Future Retail is a listed company with a market cap of over Rs 26,000 crore and has over 900 stores across the country. Kishore Biyani, who has largely been known to criticise ecommerce players, has also made some unsuccessful attempts earlier at ecommerce with Future Bazaar, Big bazaar Direct and the acquisition of FabFurish, all of which were eventually shut down.
The Walmart-Flipkart acquisition has brought focus on the grocery market, which is Walmart’s area of specialty. The market is expected to heat up in the coming months with BigBasket, Grofers, Flipkart, Amazon, Paytm Mall and Future Group upping their game to capture the market.
In fact, Future Group is currently testing an app for online delivery groceries for EasyDay members through a subscription service on the lines of Amazon Prime. This service will target daily and weekly needs of consumers such as dairy, fresh fruits, vegetables and staples.
A deal with Amazon is most likely to not only help Future Retail strengthen its presence in online grocery, but also help the company’s omni-channel strategy. According to reports, Future Group, which currently acquires about 10-15% customers through the online-to-offline channel, is planning to increase this to up to 35%.
For Amazon, this will help expand its capabilities in the same category. Amazon, through its Amazon Direct and Amazon Fresh services has been looking at entering the grocery segment in India. A deal with Future Retail will also help it have an offline presence and give it access to the large customer base of Future Group. Through the customers who have shopped at Future stores, Future Retail has data of over 500 million consumers, which will give Amazon immense insight into the shopping behaviour, patterns of Indian shoppers.
Most importantly, the deal will help Amazon take on Walmart-Flipkart in the Indian market.
Amazon has in the past invested in brick-and-mortar retail companies. In September 2017, it had bought a 5% stake in Shoppers Stop for Rs 175 crore.
Future Retail too, on its part, has been growing aggressively and has made over five acquisitions of supermarket chains over the past few years. This includes Bharti Retail, Nilgiri's, Hypercity, Heritage’s retail division and most recently, Foodworld Supermarkets. Big Bazaar, which is Future Retail’s flagship store reportedly posted an 8% increase in sales at Rs 18,489 crore in FY18. It has posted a net profit of Rs 11.31 crore in FY18 as against Rs 368.28 crore in FY17.