Apparently, the anticipated association between Amazon and Reliance Retail is likely not happening and Amazon is looking elsewhere for tie-ups. The report on this development claims the e-commerce giant has opted out due to the high valuation Reliance was placing its retail business at. Even a minority 10-15% stake would have meant committing a very huge exposure which the US company was not willing to bet on. The valuation being sought is between Rs 2.5 lakh crore to Rs 3 lakh crore.
The report says one of the other options Amazon is now considering is the offline fashion retailer Max, owned by the Landmark group. If one went by valuations alone, Max, with an annual sale of around Rs 3,500 crore may get valued under Rs 7,000 crore. Taking a similar 10-25% stake in Max will not prove very difficult for Amazon. These may be early days but talks have started, as per this report. Max and Amazon already have a relationship where Max sells its products on Amazon’s platform.
Reliance Retail comprises consumer electronics, smartphones, grocery and fashion under different brands and the collective turnover reported for the last full financial year was Rs 73,508 crore. There has been no official confirmation on these developments from either side.
According to one perspective, Amazon is trying to get into as many offline retail chains as possible and pick up minority stake with a clause giving it first right of refusal thereby blocking the likely entry of any other competitor. It has to be stated that the stricter FDI regulations in the Indian retail sector does hamper its strategy and moves.
It has thus stepped into Big Bazaar and has already acquired More supermarket chain and has a 5% stake in Shoppers Stop. The US retail giant is trying to develop its online to offline (O2O) play into a dominant force in the years to come. The company may also be hoping that the government may go easy on the FDI regulations at some future date.