Amazon Investment to Help India Retailer Add 25% More Stores
Amazon Deepens Its Push Into India With Stake in Local Retailer
(Bloomberg) -- Amazon.com Inc.’s investment in retailer Shoppers Stop Ltd. will help the Indian company boost revenue and add 25 percent more stores, while the U.S. firm expands its reach into smaller towns in the world’s second-most populated nation.
Shoppers Stop shares surged after saying it will raise 1.8 billion rupees ($28 million) selling a 5 percent stake to Amazon.Com NV Investment Holdings LLC, the Mumbai-based company said in an emailed statement late Saturday. As part of the deal, Amazon experience centers -- which let customers test out the products available online -- will be set up across Shoppers Stop’s network of 80 bricks-and-mortar stores in India. The company will add 20 stores in the next four years, Govind Shrikhande, managing director of Shoppers Stop said.
The alliance will help Shoppers Stop tap part of the 400 million monthly visitors to Amazon’s online stores, Shrikhande said. Chief Executive Officer Jeff Bezos has allocated $5 billion toward Amazon’s expansion in India as it seeks to secure an advantage over local rivals in the South Asian nation. The e-commerce giant has a lot riding in the country after its washout in China, where the dominance of Alibaba Group Holding Ltd. and other domestic players made Amazon’s entry difficult.
“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.”
Shoppers Stop, which has stores in smaller cities including Durgapur, Aurangabad and Kolhapur, is targeting 10 percent of revenue from online sales by 2020 from 1.2 percent, Shrikhande said. The company’s board approved the issuance of 4.4 million shares to a unit of Amazon for 407.78 rupees ($6.28) apiece.
Shares of Shoppers Stop surged as much as 20 percent, headed for their biggest gain in eight years as of 9:33 a.m. in Mumbai. They have climbed 65 percent this year, compared with the 19 percent jump in the benchmark S&P BSE Sensex.
Both the companies will gain from the deal, said Harminder Sahni, founder and managing director of consulting firm Wazir Advisors.
“Only 5 percent of sales are happening via online in the case of clothing, and Amazon can’t ignore the remaining 95 percent in India as people still want to touch and feel clothes,” said Sahni. “For Shoppers Stop, this deal gives access to technology and new channel of distribution.”
Shoppers Stop, which sells cosmetics to clothing and home appliances at its outlets, will have an exclusive flagship store on Amazon’s Indian site where it will retail its entire portfolio, the company said.
The deal will be Amazon’s first investment in a publicly traded retailer in India. Shoppers Stop will issue 5 percent of post-issue share capital to the Amazon unit.
“The investment is strategic and one really can’t read too much about whether the Amazon unit will raise its stake in the future,” said Shrikhande.
--With assistance from P R Sanjai
To contact the reporters on this story: Ameya Karve in Mumbai at akarve@bloomberg.net, Anto Antony in Mumbai at aantony1@bloomberg.net.
To contact the editors responsible for this story: Stanley James at sjames8@bloomberg.net, Arijit Ghosh, Jeanette Rodrigues