The Indian online to offline business strategy is set to gain further traction as Amazon partners with Goldman Sachs and Samara Capital to acquire More supermarket chain run by Aditya Birla Group. The value of the deal could reportedly be in the region of Rs 4,500 to 5,000 crore.
There is an exclusivity deal that has been signed between Aditya Birla Retail Limited, that owns the 493 odd stores throughout India and Samara Capital. It is based on this that Samara roped in Amazon and Goldman Sachs. The three, Amazon, Samara and Goldman Sachs will, in all probability float a SPV to handle this business and Amazon may take the predominant position in the new entity, holding 49%. Amazon will receive the tag of being a strategic partner. The official announcements on these may be made in the coming days.
With its biggest rival in India Flipkart having been gobbled up by its US rival Walmart, Amazon had to come up with some spectacular move to counter the effects and this deal might just be that. The only hitch is the existing law in India which limits the holding by any foreign entity in multi-brand retail to a maximum of 49%. That is why the consortium and an Indian partner in the form of Samara Capital.
There is one more significance in Amazon taking this position in the acquisition of the More retail chain apart from creating the O2O or omni-channel retail business. That has to do with the food retail. Having acquired Whole Foods in the US for a whopping $13.7 billion, Amazon was growing impatient with the progress its Indian arm, Amazon Fresh was making despite the infusion of funds.
Amazon is aware of Walmart’s strengths in this area and would want to be fully prepared to compete with the might of Walmart-Flipkart in the grocery-foods-fresh products space. More would be the right thing happening for Amazon from this perspective.
Aditya Birla Retail Limited (ABRL) has posted good revenues and has been able to cut down on the losses incurred but has run up a huge debt of about Rs 6,573 crore. At the individual store level, the company claims it is a profitable venture.
The omni-channel space is expected to see more action with Reliance aiming to combine its offline stores with the backing online by its digital arm Reliance Jio. Companies like Paytm also have similar plans, egged on by investor Alibaba.