BANGALORE -- Amazon.com and Future Group are reportedly in advanced talks for the U.S. e-commerce pioneer to buy a 10% stake in India's third-largest merchandiser so the partners can tap the Asian giant's traditional walk-in consumer.
India has one of the world's fastest-growing retail markets, which is expected to be worth $1.2 trillion by 2021, a big jump from $795 billion in 2017, according to a report by Deloitte India and Retail Association of India. However, the country's brick-and-mortar retail mostly consists of mom-and-pop groceries and other small-scale merchants. As a result, the retail landscape is strewed with opportunities.
The talks first emerged last May, although discussions suffered a setback after the Indian government implemented new foreign direct investment rules for e-commerce players. Amazon then suspended the talks, only to revive them now after a way around the rules surfaced.
Amazon seeks a substantial lead in both online and offline grocery retailing in India, and the potential deal with Future Group, which operates its flagship Big Bazaar grocery store chain, is a crucial 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 cities and owns brands like 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 the U.S., the company acquired premium grocery store chain Whole Foods for $13.7 billion in 2017, to get a toehold in the $840 billion American grocery industry. However, Whole Foods has been struggling to survive, according to a report by Bloomberg.
But that has not deterred 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 past few years. Shoppers Stop has a network of 80 department stores and More runs 523 supermarkets and 20 hypermarkets.
Amazon's local nemesis, Flipkart, is also considering a move to enter India's online grocery business. The company has held talks with Namdhari's Fresh to buy 30 stores in Bangalore, but the sides have yet to reach a deal.
KrASIA is a digital media company focused on technology-driven businesses and trends across the Asia-Pacific region. It is under 36Kr, a tech news portal based in Beijing. Nikkei announced a partnership with 36Kr on May 22, 2019.