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SC verdict on RIL-FRL deal: Can Amazon get strategic advantages out of Future Retail?

SC verdict on RIL-FRL deal: Can Amazon get strategic advantages out of Future Retail?

SC verdict gives Amazon a serious shot at the Indian market. Analysts tracking Future Retail say the big attraction for Amazon is the backend, which includes the ability to source products

Amazon already has a stake in Future Coupons, a Future Group company, and a larger pie of the consumer beckons. Photo: Reuters Amazon already has a stake in Future Coupons, a Future Group company, and a larger pie of the consumer beckons. Photo: Reuters

The folks at Amazon India must be a happy lot with the Supreme Court verdict. Not only does it restrain Reliance Retail from going ahead with its merger with Future Retail but gives Amazon a serious shot at the Indian market.

Amazon already has a stake in Future Coupons, a Future Group company, and a larger pie of the consumer beckons.
There are clear strategic advantages that Amazon can get out of Future Retail. Right on top is a footprint of around 1,700 stores across formats, among which are Big Bazaar, Easyday, Foodhall, and Hypercity.

In better times, Kishore Biyani, Future Group's founder, was smart in growing the business organically and through well thought out acquisitions. For instance, Nilgiris and Heritage gave them a significant foothold in the south.

Of course, there is no small matter of FBB (expanded to Fashion at Big Bazaar), a fast fashion foray that alone brings in a turnover of Rs 6,500 crore. Around 80 per cent of the outlets are housed in Big Bazaar, with the rest being standalone stores.

Also read: RIL-Future deal: SC judgement addresses 2 limited points, not merits of disputes, says FRL

Analysts tracking Future Retail say the big attraction for Amazon is the backend, which includes the ability to source products. While Amazon, with its deep pockets, can easily establish all this, the time taken for that is hard to ignore. "If Amazon has a large presence and the ability to service many pin codes, the reach of a Big Bazaar can be hugely incremental," says an analyst at a domestic broking house.

Also read: Big relief for Amazon; Supreme Court upholds plea against RIL-Future deal

For instance, reaching out to the interiors of India gets strengthened as Amazon will now have access to Future Retail's supply chain and sourcing. As it is, Amazon Pantry gives it a presence in the household segment of the business and the opportunity can now get much larger. The ability to grow apparels is possible with a brand like FBB - it is already a well-oiled machine where contract manufacturer relationships are in place.

What will come of the stores is still unclear since FDI in multi-brand retail remains a contentious issue. Unlike a host of sectors where automatic approval is the norm, retail is a tricky one. If Amazon wants to run the stores, it will come with several riders and is sure to attract its share of controversies as well. For now, Amazon will look forward to a healthy share of the Indian consumer story.

Also read: Singapore's emergency arbitrator held Future Retail investment 'legal': Amazon in SC