Amazon NV Holdings, the investment arm of Amazon.com, has filed an application with the Competition Commission of India (CCI) to acquire 5% minority, non-controlling stake in departmental store chain Shoppers Stop.
Incidentally, through its investment in Shoppers Stop, will get Amazon a minor stake in Future Retail. The retail arm of Future Group acquired Hypercity from Shoppers Stop in October this year, as part of a $101.5 Mn (INR 655 Cr) cash-and-stock deal.
The development comes less than three months after the Shoppers Stop board approved the proposal to allot equity shares to Amazon, in exchange for an investment of $27.7 Mn (INR 179.2 Cr). At the time, it was reported that the global ecommerce behemoth would be buying a total of 4.4 Mn shares in Shoppers Stop at $6.3 (INR 407.78) apiece.
Why Amazon Is Keen On Acquiring A Minority Stake In Shoppers Stop
As part of the deal, Shoppers Stop has also signed an exclusivity agreement with Amazon Seller Services. According to a report by Livemint, more than 400 of Shoppers Stop’s private labels and brands will soon be sold on a dedicated microsite with Amazon.in.
Commenting on the development, Shoppers Stop CEO and MD Govind Shrikhande said back in September, “We will have the same discounts on Amazon as we carry in our stores.”
According to the terms of the deal, the two companies will be conducting “joint marketing” initiatives in the coming months. On the one hand, Amazon’s experience centres will be created across the network of Shoppers Stop stores to bring the touch and feel aspect to the Amazon.in assortment.
The investment from Amazon, on the other hand, will enable Shoppers Stop to expand its physical as well as online retail businesses.
Shrikhande added, “These will be for customers to touch and feel Amazon’s exclusive brands, mainly for fashion and accessories. This is still a work in progress and we will be able to share more details by Q4 (quarter ending March) of this financial year (2017-2018).”
A Bit About Mumbai Headquartered Shoppers Stop
Headquartered in Mumbai, Shoppers Stop is engaged in the retailing of branded apparel and accessories, beauty care products, kids and baby care products, home décor and furniture and books and stationery through a chain of flagship stores of “Shoppers Stop”, “Home Stop” and “Crossword” brands.
Owned and operated by the K Raheja Corp Group, Shoppers Stop currently has around 83 stores across 38 cities in India. However, its presence in tier II and tier III cities is still relatively small. By leveraging Amazon’s wide reach, the departmental store chain is looking to expand its footprints in the untapped non-metro regions.
Furthermore, the newly-forged partnership will enable Shoppers Stop to utilise Amazon’s logistical capabilities, in order to reach a wider section of consumers.
Amazon Strengthening Brick-And-Mortar Presence Through Partnerships
Amazon has been playing its cards quite well in Indian landscape. Even with a commitment of $5 Bn in India, the company has not been able to claim the top spot due to cut-throat competition from homegrown ecommerce giant Flipkart.
In the last couple of months, the online marketplace has joined hands with a number of domestic companies, in a bid to bolster its brick-and-mortar presence across the country. By forming JVs or partnerships, Amazon is looking to strengthen its customer base as well as brand positioning, while also enhancing trust and credibility.
In July, for instance, reports surfaced that Amazon India was looking to join hands with the family-run investment office of Infosys co-founder Kris Gopalakrishnan and Burman Family Holdings, the parent company of consumer brand Dabur.
Later in April, it tied up with Indian FMCG major Dabur India for an online Ayurveda marketplace. In the same month, Amazon formed a JV with Ashok Patni Group to elevate its brand presence amidst Indian customers by supporting the growing number of local-language customers.
Amazon’s biggest rival Flipkart has also doubled down in its efforts to bolster its offline presence. Flipkart-owned Myntra has already started working on an offline strategy, having opened a store in Bengaluru for its private label brand Roadster earlier this year. It also got omni-channel distribution rights for international fashion brands like Mango and Esprit earlier this year.
As per a recent report by Morgan Stanley, the Indian ecommerce market is poised to reach $200 Bn by 2026, expanding at a compound annual growth rate of 30%. By acquiring a minority stake in Shoppers Stop, Amazon is preparing to reach a larger percentage of consumers by tapping the former’s wide brick-and-mortar presence.