Firms of billionaires compete for supremacy in India’s retail sector

Two of the richest men in the world, Jeff Bezos of Amazon.com and Mukesh Ambani of Reliance Industries Limited (RIL) have locked horns for dominance in India’s near trillion-dollar retail sector.

Analysts say the outcome of the court battle in which Reliance and Amazon are embroiled will set the rules of engagement in the retail sector for years to come.

The winner in the fight for Future Retail, Amazon’s estranged local partner, will get pole position in the race to meet the daily needs of more than a billion people.

Accusations of insider trading and contractual breaches, as well as nationalistic cries to keep the US giant at bay, mark the high-stakes fight, which has snowballed from what began as a dispute between Amazon and Future.

If Amazon succeeds, it may slow Reliance’s plans to expand its e-commerce and brick-and-mortar operations. If Amazon loses, its hopes of expanding its interests in India’s second-largest retailer and cashing in on its key grocery supply chain will be dashed, industry insiders say.

Amazon is trying to stop Reliance’s $3.4 billion purchase of Future Group’s retail assets. The US company, which won an injunction from an arbitrator to block the Reliance-Future deal, accuses its partner of breaching some pre-existing agreements, misleading the public and insider trading. Future denies the allegations.

Amazon, Reliance and Future did not respond to requests for comment.

Bezos’s behemoth is a formidable foe, but Ambani has a history as a disrupter. He has shaken foreign telecom firms by offering dirt-cheap data. Industry executives see his e-commerce plans as a threat for Amazon and Walmart Inc’s Flipkart.

“If Reliance moves faster and faster, obviously it’ll become very difficult for anyone else to gain,” said Himanshu Bajaj, head of consulting firm Kearney’s India retail practice.

Reliance, seeking to expand its JioMart e-commerce business, this month completed a $6.4 billion fund-raising by selling a stake in its retail arm to such investors as Silver Lake Partners and KKR & Co.

India’s retail market will grow 46% over the next four years to an annual $1.3 trillion, reckons Forrester Research. The key battle is over groceries, expected to be worth around $740 billion a year by 2024.

Founded by Kishore Biyani, dubbed India’s retail king, Future transformed the country’s retailing in recent decades, before COVID-19 hit the business so hard this year that Biyani was forced to find a new buyer.

Around 1,300 of Future’s more than 1,700 retail outlets in 400 cities sell groceries. Its budget supermarkets cater to middle-class shoppers, while its upmarket stores offer products like imported cheese and fresh guacamole, relatively rare in India’s retail landscape.

That makes Future a prized asset for both Reliance and Amazon.

Reliance and Future dominate the market, with the next competitor, Avenue Supermarts’s DMart, having just 220 outlets in around 70 cities.

While Reliance boasts around 11,000 retail stores, just 800 of those offer food and groceries, UBS estimates. Future’s retail assets would nearly triple Reliance’s footprint in the grocery segment and boost its e-commerce plans, said Forrester analyst Satish Meena.

Amazon sees Future as a long-term play to optimise its supply chain for grocery delivery, an area where it has lagged, Meena said.

“Grocery is the category in which you fight,” he said, while losing Future to Reliance would “slow Amazon”.

Amazon, Future and Reliance this month hired some of India’s top lawyers, who argued at length before a New Delhi judge. She is expected to decide soon whether to restrain Amazon from approaching regulators to block the Future-Reliance deal.

Amid heated legal arguments and patriotic appeals, Future’s lawyer attacked Amazon as “Big Brother” in America, arguing Future faces bankruptcy if the Reliance deal fails.

“Please don’t allow this American giant to kill Future,” the lawyer urged the judge.

Meanwhile, India banned 43 mobile apps, including Alibaba Group Holding’s e-commerce app Aliexpress, in a new wave of web sanctions targeted at China after the neighbours’ months-long standoff on their rugged Himalayan border.

The 43 mostly Chinese-origin applications, which also include a few dating apps, threaten the “sovereignty and integrity of India”, the technology ministry said in a statement.

India has previously banned more than 170 apps, saying they collect and share users’ data and could pose a threat to the state.

The moves, which India’s technology minister has referred to as a “digital strike”, were initiated after 20 Indian soldiers were killed in a skirmish with Chinese troops at a disputed Himalayan border site in June.

The Chinese embassy in India said on Wednesday it “resolutely” opposed the ban. Alibaba did not immediately respond to a request for comment.

Aliexpress is not a major player in India’s fledgling e-commerce market, which is led by Walmart’s Flipkart and Amazon.com’s local unit. It is, however, popular with some motorcycle enthusiasts and small shopkeepers, who use it to source cheap goods.

The move is another setback for Chinese giant Alibaba, which is the biggest investor in Indian fin-tech firm Paytm and also backs online grocer BigBasket.

Its subsidiary UC Web laid off staff in India earlier this year after New Delhi first banned 59 Chinese-origin mobile apps that included UC Web’s browser and two other products.

The Chinese tech giant was also forced to put on hold its plans to invest in Indian companies following the border tensions between the two nuclear-armed countries, Reuters previously reported.