Future Group and Reliance Retail agree deal: Amazon sees this as a threat to its position in India

In comparison to the US and UK, e-commerce currently makes up a small percentage of the retail market in India. But this figure is predicted to change as the number of Indians using smartphones and the internet increases rapidly over the next decade. Strong economic growth and demographic trends are providing the Indian e-commerce market with a definitive advantage helping it grow at a rapid pace. The Indian population is relatively young compared to other major economies, inciting higher online spending.

Moreover, while the coronavirus pandemic has hit India’s economy, like many parts of the world, it is inevitable that more players will be tapping into the online platform following lockdown measures. The Covid-19 pandemic is the key driver for the acceleration in the adoption of numerous technologies and changing consumer behaviors, mainly e-commerce. Therefore e-commerce giants including international players are looking for growth opportunities and tapping into the Indian online market.

However, the dispute between Amazon and Future retail over the Future/Reliance deal has strained Amazon’s ties with one of India’s leading retailers as well as with Ambani, Asia’s richest man, and his Reliance group. The Reliance group is fast expanding its e-commerce business and is a potential rival to Amazon. Amazon, which owns a stake in one of Future Group’s holding companies, has raised objections over the deal, arguing that this deal breaches agreements made in 2019 by Future. Amazon claims its 2019 deal in which it invested nearly $200m in a Future unit included clauses stipulating the Indian group could not sell its retail assets to anyone on a restricted persons list, which included Reliance. In response to this, Future Group sought an ad-interim injunction to restrain Amazon from writing to regulators and other authorities to raise concerns over the deal between the two Indian giants.

The CCI, the Indian antitrust body has approved the proposed acquisition of retail, wholesale, logistics and warehousing businesses of Future Group,  India’s second largest retail chain, by Reliance Retail, the largest chain. This acquisition will strengthen both companies position in the India e-commerce market, as such it is no wonder Amazon has tried to block the deal.

As a domestic business, Future/Reliance will have a major advantage over Amazon; these retailers will not be constrained by some of the protectionist regulations brought in to protect Indian firms.