Amazon.com Inc. (AMZN) is wading further into India with the purchasd of a 5 percent equity stake in department store chain Shoppers Stop. The investment is being made through the e-commerce giant's Amazon NV Holdings LLC.
The Seattle-based company’s 1.8 billion rupee ($28 million) investment, its first in a publicly traded Indian retailer, was approved by Shoppers Stop’s board over the weekend, the Mumbai-based operator of department stores and other retail outlets said in an emailed statement seen by Bloomberg. Shoppers Stop added that its agreement to sell Amazon 4.4 million of its shares at 407.78 rupees ($6.28) a piece will boost revenue and help it to fund the opening of 20 new stores over the next four years. (See also: Alibaba vs. Amazon: A Tale of Two Growth Stories.)
Under the terms of the deal, Amazon’s experience centers, which enable customers to test out products online, will be rolled out across Shoppers Stop’s 80 stores in India. The two companies also entered into an exclusive partnership that gives Shoppers Stop the right to set up a flagship store on Amazon’s Indian website.
Govind Shrikhande, managing director of Shoppers Stop, believes the alliance can help the Indian retailer to attract some of the 400 million monthly visitors that browse Amazon’s online stores. "The partnership with Amazon will really accelerate our revenue from online sales and we expect it to double every year for the next three years,” Shrikhande said in an interview on Sunday. “Amazon will give us space in its fashion segment online where its users will have access to about 400 brands from our catalog.”
Amazon’s India Ambitions
Amazon’s partnership with Shoppers Stop, which also has stores in smaller cities, including Durgapur, Aurangabad and Kolhapur, should boost the Seattle-based company’s ability to reach more consumers in India, the world’s second most populous nation, Amazon’s CEO Jeff Bezos allocated $5 billion to expand in the country, mindful that rising disposable incomes and better internet access is fueling a sharp surge in ecommerce sales there.
Amazon will be hoping its Indian venture fares better than its Chinese one. The world's largest online retailer reportedly commands less than a 1 percent market share of the business-to-consumer ecommerce market in the world’s most populous country, according to Recode, having struggled to compete against the likes of Alibaba Group Holding Ltd. (BABA) and JD.com (JD).
Indian ecommerce sales are predicted to reach $35 billion by 2020, according to a 2016 report from accounting firm EY, after growing at a compound annual growth rate in excess of 50 percent over the last five years. (See also: Amazon's Biggest Rivals in India Close to Merging.)