Global retailers are looking to enter into joint ventures or acquire stakes in domestic businesses to achieve bigger scale through multi-channel operations, say consultants.
US-based e-commerce giant Amazon is in talks to buy a stake in Aditya Birla Retail and Chinese online major Alibaba is discussing a joint venture with Reliance Retail (JV), according to reports on Monday. “The retail players are realising that larger platforms and partnerships with large players are required to make a mark in this market given the complexities in logistics, demographics, seamless customer service and widespread distribution. We are also seeing the next round of consolidation in retail,” says Rajat Wahi, a partner in Deloitte Consulting.
He says most retailers prefer inorganic route to building a retail network, which is very expensive and time consuming. They are looking at Foreign Direct Investment norms to acquire or set up JVs in India. Walmart has bought e-commerce firm Flipkart for $16 billion in a mega deal. Amazon has picked up a 5 per cent stake in Shoppers Stop and has a marketing tie-up with Future Group.
Raman Mangalorkar, chief executive at data analytics firm Atom Data, says most retailers have realised that only online or offline channel does not work. “The cost of running a single channel is very high. They need much more scale to justify the costs,” he says.
“Big boys invested a lot in retail during the exuberance of 2006-07. But it is no longer there. They have realised the need for consolidation. Those surviving need funding,” Mangalorkar says.
Aditya Birla Retail, Tata’s Star Bazaar and others, who have forayed into retailing during 2006-07, are yet to make profits at the entity level.
Arvind Singhal, chairman at Technopak Advisors, says Alibaba has a lot of interest in larger consumer domain and links customers through technology. “Here, Reliance is the most perfect company to partner with,” he says. Singhal says Reliance is building a platform through Jio to cater to customers’ needs. “Reliance is the largest in terms of space and revenue. It won’t be a surprise if some global companies tie up with it,” he says.
Reliance has three million offline merchants and 7,500 stores. Taxation and inventory management solution JioGST would be using these to make its grocery service hyperlocal.
“Its three million merchants and more would be offered Cloud services at the most competitive prices. Reliance plans to bring millions of new merchants to the Cloud so that it can have a vast interconnected network of sellers,” he says.
Singhal says Amazon has shown interest in food retailing in the US through acquisition of Whole Foods. “Aditya Birla Retail fits into their strategy if you see what they are doing in the segment,” he says.
By the end of this year, Amazon might bring in its Whole Foods to India, sources in the know say. Though plans are not yet final, the company — which has two different grocery segments, Amazon Pantry and Amazon Now — is toying with the idea of bringing in healthy, organic and niche products to the burgeoning millennial user base at affordable prices.
The company, which has been fine-tuning its grocery service, is not seeing more than a 50 per cent of the total sales in the grocery segment