Amazon has tied up with the Future Group retail chain in India, which is a big step-up in distribution capability for both, and sounds fresh alarm bells for local ecommerce players Flipkart and Snapdeal.
Media reports said the deal goes far deeper than selling Future Group products on Amazon. “We are exploring synergies in data sharing, co-branding, and distribution network sharing,” Future Group chairman Kishore Biyani told The Economic Times .
For Amazon, the tie-up will tackle one of the biggest headaches for ecommerce in India – logistics. The Future Group distributes goods to retail shops across the country, and this network will enhance Amazon’s efficiency and reach. Conversely, for the Future Group, it opens up access to as many as 19,000 zip codes that Amazon currently serves in India. Amazon’s order fulfillment will reduce distribution costs too.
The Future Group also has its own brands in apparel, food, and fast-moving consumer goods. These will all come on to the Amazon site now. The two companies will develop new products that will be sold exclusively on Amazon.
One of India’s largest private conglomerates, the Future Group runs 10 retail chains, including hypermarket Big Bazaar, electronics store eZone, and sportswear store Planet Sports. It employs 30,000 people directly, and serves 300 million customers every year. Founded in 1987, the Future Group crossed US$1 billion turnover in 2007.
“Our tie-up (with Amazon) is about the Future Group entering pure ecommerce. It is a significant step for us,” Biyani told Business Standard .
The deal with Amazon comes days after Biyani had been one of the most vocal critics of deep discounting on Flipkart during its Big Billion Day, which he had said is “killing local trade”. It will be interesting to see what kind of strategy the Future Group now works out with Amazon, which has even deeper pockets than Flipkart for discounts to get market share.
Amazon has in recent months gone head on with Flipkart. On July 30, just a day after Flipkart made its big bang US$1 billion funding announcement, Amazon (NASDAQ:AMZN) announced that it will invest an additional US$2 billion to fuel the growth of Amazon.in, its online marketplace in India. Jeff Bezos, founder and CEO of Amazon, made a splash in Bangalore a week ago, waving a US$2 billion check while riding atop a truck.
Within a year of Amazon’s launch in June last year, India is on track to be its fastest country ever to a billion dollars in gross sales. Bezos said during his visit that the growth was much faster than in other new markets Amazon had entered. “The reason why we’re making such a big investment in India is because of the evidence of success,” he told The Hindu .
By 2016, the number of online shoppers in India is expected grow to 40 million, and the ecommerce market will grow to US$8.5 billion, according to a report by Accel Partners. In 2013, the market was just US$2 billion.
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