Amazon is looking to set up physical retail stores in India. This decision comes soon after the e-commerce giant launched several new products in the US.
Amazon will be buying about 49 percent of More’s shares, while 51 percent of the shares will be bought by Amazon’s partner and private equity firm Samara Capital.
Indian laws require that for any foreign business to operate in the country, majority owner should be a local enterprise.
Amazon and Samara have combined to form an entity called Witzig Advisory Services Private Limited which will contain all the ownership details through the deal. This deal is estimated around $585 million according to Indian sources.
Amazon is looking seriously at investing in brick and mortar stores, not just in the US, but across the globe. Brick and mortar stores are slowly making a comeback, and are therefore a hot commodity right now, especially in India.
Amazon has the first experience of acquiring physical stores. In 2017, Amazon bought the American supermarket chain Whole Foods for a whopping $16 billion dollars.
The e-commerce giant is following a similar gameplan with this acquisition.
Currently, Amazon is in a tough battle with Flipkart over the control of India’s e-commerce space. India is a growing hub of technology, so investors have a pretty strong chance of making some quick bucks in the Indian market.
India’s e-commerce industry is expected to increase four times in just 4 years, by 2022. According to auditing firm Pricewater House Coopers (PWC) and trade association of Indian Information Technology Nasscom, Indian e-commerce market will observe a leading compounded annualized growth rate of 35%.
Flipkart is no small fish to fry. Ever since it was bought by Walmart for $17 million earlier this year, it has been in stiff competition with its biggest rival Amazon.
This deal got Walmart through the door into India’s e-commerce industry.
This opportunity also allows Walmart to bank on Flipkart’s expertise and technology to explore further avenues and get an insight into the Indian consumer’s mind.
Amazon, it appears is going to come on top of this deal, since it has already acquired fintech startup Tapzo, to establish its own payment service in India.
Amazon is also in control of several packing warehouses in India. After the More deal, Amazon will truly be a force to be reckoned with.
E-commerce is a booming business in India
E-commerce websites will create more than 1 million jobs in India. The return on investment is almost foolproof. There is a high demand for online shopping but only a few websites are able to provide fast shipping times and efficient payment methods.
Plus the cheap human labor makes this a no-brainer for the likes of Amazon and Walmart. This is all good and well, but this sudden boom in foreign investment has raised suspicion of local lawmakers.
Policy advisers are looking to apply stricter policies for e-commerce trading, which will probably mean fewer discounts for the customers. Both Amazon and Walmart will be fighting tooth and nail to retract this policy.
Fazeel Ashraf
Jazib Zaman
