The combined might of More and Future Retail would help Amazon in more ways than one
With access to more than 2,100 offline retail stores
spread across the country, global tech and e-commerce giant Amazon
has become one of the largest retailers in the country. Late on Thursday evening, Kishore Biyani-led Future Retail, in a filing to BSE, said that Amazon.
com was acquiring 49 per cent stake in a group entity — Future Coupons.
Future Coupons, which is into digital payments, has an economic interest of 7.3 per cent in Future Retail by way of convertible warrants.
Through this deal, Amazon
would have an effective stake of 3.6 per cent in Future Retail. According to sources in the know, the deal size is between Rs 1,500 crore and Rs 2,000 crore, which values Future Retail at Rs 43,000 crore. The retail giant has over 1,500 stores across various formats.
In September last year, Amazon, along with private equity firm Samara Capital, bought Aditya Birla Group’s food and grocery retail chain, More, which runs 523 supermarkets and 20 hypermarkets. According to industry experts, this stake buy in Future Coupons would help Amazon in its three-sided crucial battle with Walmart and Reliance Retail. It will help Amazon carve out a bigger slice of India’s retail market pie.
“The present deal is of strategic value to Amazon, as according to reports, it has the right, via a ‘call’ option, to buy the entire holding of Future Coupons in Future Retail between 2022 and 2029.
While at the same time, there are also certain binding agreements over the sale of the 51 per cent stake in Future Coupons, where it can’t be sold to some specified but undisclosed buyers. Thus, Amazon also has the first right of refusal on the remaining stake,” said Salman Waris, managing partner at TechLegis Advocates & Solicitors, a law firm.
Over the next few months, sources said Amazon India may start building a fresh produce supply chain for its two-hour delivery service Amazon Fresh at More and Big Bazaar stores throughout the country.
It may also start selling its private labels in apparel as well as food brands that would make its way into the aisles of these stores. Also, More and Future Retail would help increase Amazon’s online selection, going forward.
Also, with help of the 49 per cent stake buy in Future Coupons, Amazon would now be able to expand use cases for its wallet Amazon Pay. From creating a payment option for Future Retail’s various brands to coming up with new payments solutions in the retail space, Amazon is planning to experiment a lot more with offline digital payments.
The combined might of More and Future Retail would help Amazon in more ways than one. From delivery logistics, supply chain for fresh produce, outlets to sell its private labels to finally creating an offline footprint, these stores would help Amazon to finally go offline, if the regulations permit.
Both More and Future Retail are planning to almost double their retail footprint over the next few years, which would immensely help Amazon. In the long term, Amazon believes that this base of retail stores
would help it go offline in a big way when FDI norms in retail are favourable.
This would be crucial for the tech giant to not only take on Walmart but also Reliance Retail, which is planning to go for a major expansion as part of its new commerce initiative.
Reliance, at the moment, has the biggest offline footprint with 10,500 stores under various formats to over three million merchants and kirana stores on its platform. Reliance is planning to launch Jio ecommerce, probably in the next few months.