Amazon eyes India's offline retail market; takes 5% stake in Shoppers Stop

Invests Rs 180 crore in K Raheja Group's retail chain, aims to beat rivals Flipkart and Paytm Mall

American online retail giant Amazon has picked up a 5 per cent stake in Shoppers Stop for Rs 179.26 crore, its first foray into India’s offline retail space as it looks to beat rivals Flipkart and Paytm Mall.

E-commerce is estimated to make up only 2 per cent of India’s overall retail sector, with nearly half of the sales coming from smartphones. Amazon is looking to expand its presence in the country beyond online retail. It has got a licence to operate food retail, offering customers grocery. Last week, Amazon tied up with Shoppers Stop to open experience stores at retail outlets. K Raheja Group’s Shoppers Stop retail outlets for fashion have a national presence. It also owns offline hyper mall, HyperCity, and Crossword Bookstores. 

Amazon and Shoppers Stop have signed a pact that will allow the offline retailer’s 400 brands to be sold on the Jeff Bezos-promoted e-commerce marketplace. Amazon will get space to set up experience centres at Shoppers Stop outlets to promote its fashion products on its online platform.

The Shoppers Stop stock closed at Rs 414.65 on Friday on the BSE.Investors have ploughed around $6 billion into Flipkart, while Amazon has so far committed to investing $5 billion in India. E-commerce is expected to become a major driver of retail in India over the next decade, targeting users from tier-II and -III cities, who do not have access to large offline retail stores.

Globally the trend of online retailers going offline has begun picking up. Amazon has acquired US-based offline retail chain Whole Foods for $13.7 billion in June. In China, Alibaba has opened three massive Hema supermarkets, where customers can order groceries for home delivery and even eat in.

Amazon has also opened its own bookstores in major US cities and has even piloted a self-checkout grocery store in its hometown of Seattle.

India’s largest online retailer, Flipkart, has begun experimenting with offline stores through its fashion subsidiary, Myntra. In March, Myntra opened its first store in Bengaluru to promote its largest private label brand, Roadster. Unlike previous attempts by online retailers to open offline experience centres, customers will be able to buy products directly from Myntra’s store. 

While offline retailers are also trying to go online, they have faced mixed success. Earlier this week, Aditya Birla Group-owned online fashion portal Abof said it would shut operations by the end of the year. The company said doing business online was unsustainable since rivals Flipkart and Amazon were burning millions of dollars to subsidise the cost of products.

Tata, one of the country’s largest retailers, said it has seen good traction from customers on its online portal TataCLiQ. However, the company still has a long way to go to compete with Amazon, Flipkart and Paytm Mall, which together control an estimated 85 per cent of India’s online retail market.