Alarmed at Reliance Industries Ltd's e-commerce push in 2020 with online retail arm JioMart that will deliver groceries and other household essentials, Amazon India and the Kishore Biyani-led Future Retail Ltd (FRL), part of the Future Group, on Monday announced long-term agreements to expand the reach of Future Retail stores and consumer brands through the Amazon India marketplace.
Amazon India will become the authorised online sales channel for Future Retail stores and FRL will ensure the participation of relevant stores on the Amazon India marketplace, and its programmes, the companies said in a statement.
The agreements focus on key categories like grocery and general merchandise and fashion and footwear.
Future Retail currently attracts over 35 crore footfalls across its retail network like Big Bazaar and Foodhall."Amazon and Future Retail share common values of serving customers everywhere in the best possible manner," said Biyani, Chairman and Managing Director, Future Retail Ltd.
"This arrangement will allow us to build upon each other's strengths in the physical and digital space so that customers benefit from the best services, products, assortment and price," he added.
The grocery segment is a big growth area in 2020.
Jiomart announced last week that it will list over 50,000 products and will offer no questions asked return policy.
Currently in the soft-launch period, JioMart will provide savings up to Rs 3,000 to those who pre-register for JioMart before the platform goes live.
Reliance Retail's entry into the online retail sector is the biggest challenge for Amazon and Walmart-Flipkart as the Mukesh Ambani-led behemoth is well positioned to create massive disruption in the market.
Reliance Retail operates 10,415 stores in more than 6,600 cities and towns, with 500 million annual footfalls - giving the company the kind of scale required to swiftly launch India-based operations.
"We have seen players like Grofers (backed by SoftBank, Tiger Global and Sequoia Capital) making inroads into the grocery segment. Social commerce will be another big growth area in 2020," said Satish Meena, Senior Forecast Analyst with Forrester.
"The viability of the existing and upcoming e-commerce players will be tested big time in 2020," he added.
Future Retail Ltd will list on the 'Amazon Prime Now' programme, allowing customers to get food, grocery and general merchandise delivery within two hours in Delhi, Mumbai, Bengaluru, and Hyderabad.
The company will soon list stores like Big Bazaar and Foodhall in more cities on the Amazon India marketplace.
"We are excited about the business collaboration with FRL. FRL's national footprint of stores offering thousands of products across fashion, appliances, home, kitchen and grocery will now be available to millions of customers shopping on Amazon.in, in hours across over 25 cities," said Amit Agarwal, SVP and Country Head, Amazon India.
Commenting on the development, Morgan Stanley, in a statement, said that post the arrangement, Amazon would benefit from lower cost of fulfillment, and Future Retail's store productivity will improve with better utilisation of its assets.
"This is an example of a win-win arrangement arising from a hybrid retail model, combining the digital power of e-commerce with physical retail's infrastructure and service capabilities. Amazon will benefit from lower cost of fulfillment, given FRL's large store footprint, while FRL's store productivity will improve with better utilization of its assets. For FCL, the arrangement with Amazon will help build an online distribution channel and increase the share of sales originating outside the Future Group network," it said.
Future Retail is present in more than 400 cities with over 1,500 stores that cover over 16 million square feet of retail space.
Last year, Amazon agreed to acquire a 49 percent stake in Biyani's Future Coupons, which owns 7.3 percent of Future Retail. According to reports, Future Group's Republic Day 'Sabse Saste Din' sale will also feature on Amazon.
In a separate announcement, Future Consumer Ltd (FCL) and Amazon Retail India Private Ltd (ARIPL) signed a long-term agreement for distribution of Future Consumer's portfolio of brands online.
"The collaboration with Amazon will expand the reach of our brands to new sets of customers on Amazon India's online marketplace," said Ashni Biyani, Managing Director, Future Consumer Ltd.
"We are delighted to have Future Consumer's strong brand portfolio added in, such as Golden Harvest and Desi Atta for staples, ready to eat food from Tasty Treat and dry fruits from Karmiq," said Sameer Khetarpal, Director, ARIPL.