Future Group Looking Into A Strategic Partnership With Amazon Or Alibaba!

Future Group owns the largest retail footprint in India with Big Bazaar. Now the company is looking to get into a strategic partnership with either Amazon or the Alibaba Group. At present, Amazon seems to be the more likely partner, as founder Kishore Biyani has recently met Amazon founder Jeff Bezos to discuss a possible alliance.

The Future Group led Big Bazaar covers nearly a third of India’s organised food and grocery market. Biyani has also met Alibaba officials in the past to see if the Alibaba model from China can be replicated in India.

But it still is a matter of speculation as to who the group chooses to be their strategic partner.

The Online-Offline Model

The Indian retailer is planning to bring in a strategic investor into the Future Group, while Amazon is looking to create a strong omnichannel presence in the country, especially in the grocery retail segment.

Future Group has the most successful offline retail model in India with the chain of Big Bazaar stores which combines food, non-food segment, apparel, general merchandise, appliances, kitchenware, luggage and footwear.

The government doesn’t allow overseas investment in a multi-brand retail business anymore. But Amazon will be able to invest in a retail company through their investment arm, Amazon.com NV Investment Holdings LLC. The US e-commerce major recently picked up a 5 percent stake in Shoppers Stop through this investment arm.

Amazon has registered as a Foreign Portfolio Investor (FPI) which can acquire up to 10 percent stake in an Indian entity as a single firm. Currently, an Indian company can dilute up to 49 percent of their stake through multiple FPIs.

The previous governments allowed foreign companies to acquire up to 51 percent in Indian retail companies which sell goods under several brands.

Future Group: The Amazon & Alibaba Factor

Both Amazon and Alibaba have a stronghold in their countries and dominate their home markets. The Jack Ma backed Alibaba group has a strong presence in Southeast Asia, where the company invested around $2 billion in the last few years.

Both the companies are exponentially expanding their international businesses and in India, Amazon has pledged to invest over $5 billion.

Alibaba has already invested around $500 million in the country’s largest mobile payments platform — Paytm and its e-commerce channel, Paytm Mall. Recently the Chinese company invested around $300 million in the online grocery delivery company BigBasket.

Physical Presence

The physical presence is a key factor in a diverse market like India. Online giants have been focusing more on brick and mortar stores, and Amazon has recently launched its checkout-free Amazon Go store in the US.

The company also bought Whole Foods for $13.7 billion, which helped the Jeff Bezos led e-commerce major to get into the network of about 500 Whole Foods outlets in both US and UK. Amazon wants to replicate a similar deal with Kishore Biyani’s Future Group to get access to the grocery segment in India, which will allow convergence with its own subscription pantry delivery service, Amazon Pantry.

On the other side, Alibaba has acquired major stakes in multiple retailers across Asia such as Suning Commerce Group Co, Lianhua Supermarket Holdings Co and Intime Retail Group Co in the past couple of years.

The Amazon Advantage

Amazon India recently received the government’s approval for a $500 million investment in the food sector. Soon, the company launched its grocery business in India with Amazon Pantry and Amazon Now.

Last year, Amazon bought a 5% stake in department apparel store chain Shoppers Stop, where the company will open its experience centres for the online retailer within its outlets.

The offline market access will give a greater opportunity in a country where the larger proportion of the sales happen at the brick and mortar stores. At the same time, the younger consumers are comfortable shopping online and an integrated omnichannel presence will help both the companies to dominate in their respective domains.

The online food and grocery segment has become the fastest growing segment which has expanded at an annual growth rate of 141 percent and has contributed over $15 billion.

Big Bazaar – The Market Leader

The Biyani led Future Group has successfully acquired over a total retail space of 13.6 million sq ft and is present in over 255 cities with 930 stores. No other retailer in India can match with Future Group’s presence apart from Reliance Retail.

Several other retailers in the country are trying to provide a similar multichannel platform where consumers can easily switch between channels to buy products. Major retailers like Tata, Reliance and Godrej have launched their omnichannel initiatives in the recent past.

A strategic partnership with Amazon or Alibaba will turn the Big Bazaar stores to function as a marketplace, which will give consumers access to the company’s entire inventory through the digital medium and vice versa.