Amazon (AMZN - Free Report) is making every effort to aggressively expand presence in the India retail market for quite some time now with its robust retail strategies.
The company previously revealed its intention to buy a minority stake in Future Retail, which is owned by Kishore Biyani’s Future Group. It is progressing with the endeavor.
With regard to that, Amazon is reportedly close to acquiring 10% stake in Future Retail, which is India’s one of the largest retailers. Notably, the Future Retail wants the deal to be valued at $281 million.
We believe the latest move is likely to bolster Amazon’s brick-and-mortar presence in India. Further, the deal might pave the way for the e-commerce giant to strengthen its fresh produce and vegetables delivery in the country by capitalizing on the strong demand for the same
All these are likely to drive sales growth of Amazon’s retail business, which in turn will drive the company’s top line.
India Holds Promise
According to an India Brand Equity Foundation report, the retail market of India is expected to reach $1.2 trillion by 2021. Further, total consumption expenditure in the market is anticipated to hit $3.6 trillion by 2020. Moreover, the market is witnessing solid momentum across online retail sales on the back of ongoing digitization, and rising Internet and smartphone user penetration.
We note that stake in Future Retail makes Amazon well poised to reap benefits from this rapidly growing market.
Moreover, Future Retail’s owns over 2,000 stores across 400 Indian cities. More importantly, it operates Big Bazaar, which is one of the nine supermarket brands it owns.
Moreover, the retail group is expanding its fashion wear chain namely fbb rapidly. We believe Amazon is likely to gain traction further in the market with the growing popularity of Big Bazaar and fbb.
Intensifying Battle in India
The immense growth opportunities in Indian retail space are attracting increasing investments from the domestic and overseas companies.
Notably, Walmart (WMT - Free Report) showed the way by acquiring Flipkart to make its foray into this potential market. Additionally, Alibaba (BABA - Free Report) is planning to invest $250-$300 million in online grocer, Bigbasket, and is trying to strike deals with India giants – Reliance and Tata.
Further, Reliance Retail and Reliance Industries’ plan to develop an e-commerce platform by combining Reliance Retail and Reliance Jio Infocomm. The platform will be based on online-to-offline (O2O) marketing program.
Additionally, eBay (EBAY - Free Report) is planning to relaunch its India division, eBay India.
Nevertheless, Amazon’s investment spree across Indian retailers is likely to make the work harder for the other companies interested in the space.
Apart from Future Retail investment plan, the company’s acquired 49% in More, a food and grocery supermarket chain which remains a major positive. Amazon also owns 5% in Shoppers Stop.
All these will continue to strengthen Amazon’s competitive position in the Indian retail market.
Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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