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Amazon's Future Retail Deal to Boost Retail Hold in India

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Amazon (AMZN - Free Report) is strengthening relationship with Future Retail, which is owned by Kishore Biyani’s Future Group, in a bid to expand presence in the India’s retail market.

Reportedly, Amazon has recently entered into a long-term agreement with Future Retail that will authorize it as the official online sales channel for the latter’s retail stores. Notably, Future Retail owns and operates 1,500 stores across India.

Notably, Future Retail’s lifestyle food superstore, Foodhall, and most importantly Big Bazaar, which is one of the largest department and grocery stores chain of India, will be available online via Amazon India marketplace.

The new agreement will primarily focus on groceries, general merchandise, beauty, fashion and apparel, footwear, accessories, luggage, travel gear, eyewear, perfumes, among other categories.

Deal Rationale

The latest partnership seems to be a win-win situation for both the companies as they will be leveraging each other’s strength in offline and online retail space in order to expand market share.

With Amazon’s distribution strength, robust delivery services, huge online network and wide customer base, Future Retail will be able to expand customer reach.

Further, Future Retail will leverage Amazon’s two-hour delivery platform Prime Now in order to deliver better shopping experience to customers. We note that Prime Now is currently available in Delhi, Mumbai, Bengaluru and Hyderabad.

Further, Future Retail intends to expand the facility of packaging and pickup of online orders across more stores. The facility is currently available in 22 stores.

Meanwhile, Future Retail, India’s second largest retail chain, is continuously gaining momentum in the country’s retail market with over 350 million in footfalls a year. This will aid Amazon in benefiting from the country’s booming retail market. Moreover, growing popularity of Big Bazaar and fbb remains a major positive and is likely to aid Amazon in attracting more customers to its platform.

Future Retail stores’ products will be now available on Amazon’s e-commerce site across more than 25 cities of the country.

All these factors are likely to aid Amazon in capitalizing on prospects of the retail market of India, which as per a report from India Brand Equity Foundation report, is expected to hit $1 trillion in 2020.

Moreover, online retail space is expected to generate revenues worth $60 billion by 2020.

Retail Space of India Heats Up

The immense growth opportunities in the retail space of India are attracting increasing investments from the overseas companies.

Walmart’s (WMT - Free Report) acquisition of Flipkart to capitalize on this prospective market is a testament to the same.

Additionally, Alibaba’s (BABA - Free Report) strategic investment in online grocer, Bigbasket, is noteworthy. Further, this Chinese e-commerce giant is trying to strike deals with Indian giants — Reliance and Tata.

Additionally, eBay (EBAY - Free Report) re-entered the online retail space of India through its country-based website.

Nevertheless, Amazon’s growing investments across Indian retailers are likely to continue aiding its competitive position against the abovementioned companies.

Amazon has reportedly given its consent to acquire 49% stake comprising both voting and non-voting shares in Future Coupons, a Future Group entity.

Further, 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 presence in the retail market of India.

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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