Only 7 per cent of the $1.2-trillion retail market is online, and players including Amazon, Flipkart, and Reliance's JioMart are competing with one another and eyeing the remaining 93 per cent, according to analysts.
Due to foreign direct investment (FDI) regulations, Amazon
and Flipkart cannot directly acquire assets, according to analysts. These firms are doing smaller deals with offline retail players such as Shoppers Stop, Future and Arvind Fashions and working as a partner. The e-commerce firms
are trying to get more offline assets so that when there are changes in the regulations, they are in a better position to acquire these assets.
“It is about finding handholds and footholds wherever they can,” said Devangshu Dutta, CEO of retail consultancy Third Eyesight. “If the foundation stones are not in place, they can’t build the building when the rules change later,” he said.
He said that given India is a long term market strategically, it makes sense for these e-commerce players to "cobble together" the stakes by investing in the offline retail players.
In July, Flipkart Group invested Rs 260 crore for a significant minority stake in retailer Arvind Fashions’ (AFL) recently formed subsidiary Arvind Youth Brands, which owns the Flying Machine brand. This investment builds on the long-standing engagement between the two organisations that have been working together for several years to address the demands and needs of the fashion-conscious youth in India. Through this investment, the Flipkart Group and Arvind Fashions are working collaboratively to identify opportunities and synergies to innovate and develop products with strong value propositions at attractive price points.
In September this year, Amazon and private equity firm Samara Capital jointly invested over Rs 275 crore in Witzig Advisory Services, holding firm of the More supermarket chain, according to regulatory filings. In 2018, Samara Capital and Amazon signed a deal to acquire food and grocery retail chain More from the Aditya Birla Group, in a deal reportedly valued at around Rs 4,200 crore.
Last year in August, Amazon bought a 49 per cent stake in retail conglomerate Future Group’s unlisted firms, entity Future Coupons for Rs 1,430 crore. Future Coupons owns a 7.3 per cent stake in Future Retail. In 2017, retailer Shoppers Stop had said it will raise Rs 180 crore by selling 5 per cent stake to Amazon.