An Unexpected Retail Battle: Amazon vs. Reliance
Worth $900 billion with 1.3 billion customers, India’s retail market is one to be reckoned with. In a race to enter and dominate this growing industry, companies like Amazon, Future Group and Reliance have plunged themselves onto the battlefield.
AMAZON AND FUTURE GROUP
The deal dates to 2019 when Amazon acquired a 49% stake in Future Coupons for $201 million (1,500 crore rupees). Future Coupon holds a 9.82% stake in the retail division, giving Amazon indirect ownership of a 4.81% stake in Future Retail. Future Retail owns India’s leading retail outlets such as Big Bazaar, fbb, WHSmith and Hyper City. According to Amazon, the deal entailed clauses that would hinder Future from selling retail assets to certain rivals, including Reliance. Additionally, any disputes regarding the transaction had to settle under rules laid down by the Singapore International Arbitration Centre (SIAC).
2020 was a challenging year for Future Group, which prompted them to sell assets to Reliance. What followed were a series of counterattacks amongst the two companies. Future Group, claiming no wrongdoing on their end, moved the situation to the Delhi High Court. The Reliance — Future Group deal received the nod from CCI and the Securities and Exchanges Board of India (SEBI). However, Amazon approached Singapore arbitrators and successfully halted the sale.
RELIANCE’S STUNNER MOVE
The Reliance Group, headed by Mukesh Ambani, is India’s biggest conglomerate. The company has been one of the largest contributors to India’s economy, investing more than $5.6 billion (41,500 crore rupees) across all sectors.
For most of this legal dispute, Reliance had maintained their silence, until February 25th.
Reliance proceeded with a de facto takeover of around 500 stores from cash-strapped Future Group, now owning the crown jewel of Future’s retail network. A majority of Future’s management was in the dark about the takeover, one employee at a New Delhi Big Bazaar quoted, “It was tense, everybody was panicking. We didn’t know who they were. They wanted access and seniors didn’t know about it.” Reliance has stated that all Future employees will be retained.
Discussions between Amazon and Reliance are to be expected soon since Amazon’s lawyer Gopal Subramanium allegedly said “People have taken over shops… lets at least have a conversation”. However, it is safe to say that Reliance has already won this battle owing to Amazon’s negligence. Devangshu Dutta of retail consultancy Third Eyesight says, “If anybody should have seen this coming, it should have been Amazon, and they should have prepared against it”.
RELIANCE AND THE FUTURE OF RETAIL IN INDIA: AN OPINION
Reliance certainly shocked the business world with its overnight takeover.
The prospects for Reliance to dominate the retail market are bright. Reliance industries have been around for decades. It is a matter of pride for many to work under the Reliance brand. If they keep true to their word and retain existing employees, it would be a win for those lower down the hierarchy, not involved in the decision-making process. Additionally, it would serve as a way for Reliance to gain the trust of these employees.
Moreover, the brands under Reliance Retail’s belt is an impressive list, ranging from in-house brands like Reliance Fresh, Jio Mart, Trends, Reliance Digital and Reliance Jewel, to globally recognised names like Hamleys and 7-Eleven. The takeover of Future retail stores would expand Reliance’s distribution while ensuring top-notch quality and products are delivered to the citizens of India. Profits remain in the Indian economy and are not repatriated to developed western countries.
With all that Reliance has done for India, their move will help prevent the western exploitation of the huge market base and the multitude of resources that India has to offer.
