Amazon is drawing battle lines with Reliance in the race for India’s estimated $ 1 trillion retail market
Amazon.com Inc. said its Indian partner Future Group breached a contract by signing a $ 3.4 billion sales deal with billionaire Mukesh Ambani’s Reliance Industries, a dispute that could derail the country’s largest retail deal. “We have taken steps to enforce our contractual rights,” a spokeswoman for the Seattle-based e-commerce giant said in an email. “As the matter is under trial, we cannot provide details.” A representative for Future Group did not immediately respond to a request for comment.
Amazon agreed to buy 49 percent of one of Future’s unlisted firms last year, with the right to buy from the flagship Future Retail after a period of three to 10 years. But about two months ago, rival Reliance announced that it would buy the retail, wholesale, logistics and warehousing units of the indebted Future Group, nearly doubling its presence as India’s largest retailer.
Amazon “certainly would have built in strong non-competition and a first right of refusal,” said Arvind Singhal, president of retail consultancy Technopak Advisors. “It seems that this clause has been breached.”
With the dispute, Amazon is drawing battle lines with Reliance in the race for India’s estimated $ 1 trillion retail market, where online shopping is gaining ground. For Amazon, the Indian partner was crucial in strengthening its presence after becoming the authorized online sales channel for Future Retail stores selling everything from groceries to cosmetics to clothing.
The war for a slice of the emerging market is reshaping India’s retail landscape, and Reliance, Amazon and Walmart Inc. are looking to dominate the field. Ambani just raised more than $ 5 billion selling stakes in Reliance Retail Ventures to private equity firms and sovereign wealth funds. The mogul was offering an approximately $ 20 billion stake in his own retail business to Amazon, a person with knowledge of the matter said last month. Tata Group, the $ 113 billion conglomerate, is also preparing to enter the fray.
“Amazon’s action creates an obstacle for Reliance Retail,” Singhal said. “Why wouldn’t they? It’s fair game, since that’s exactly what Reliance would do.”
Nascent market
Amazon founder Jeff Bezos has made the fledgling Indian market, with its 1.3 billion consumers, a key focus of his global expansion. It has already committed to investing $ 6.5 billion in the country. It also faces competition from Walmart, which spent $ 16 billion in 2018 to acquire local e-commerce leader Flipkart Online Services Pvt. And has invested more than $ 1 billion this year in the entity after selling its Indian operations to the electronic retailer.
The agreement between Reliance and Future, announced in late August, is awaiting regulatory approvals. A Reliance spokesperson declined to comment. Television channel ET Now previously reported that Amazon sent Future a legal notice.
(Except for the headline, this story has not been edited by NDTV staff and is posted from a syndicated channel.)
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