Amazon is facing off Reliance in India, here’s why
Amazon, world's largest e-commerce business is facing off Reliance, India's largest company in a legal battle that could shape the growth of the Indian e-commerce scenario. Amazon is pitting itself against the local giant with home ground advantage, which analysts think will pose a major challenge unlike anything Amazon has faced before.
What the feud is about
The apple of discord is an Indian retailer – Future Group. Since 2019. Amazon has owned a 49% stake in Future Coupons, with an indirect ownership stake in Future Retail.
Earlier this year, Future Group made a deal with Reliance Group to sell $3.4bn worth of its retail assets. Amazon argued that, its indirect ownership of Future Retail prevented Future Group from selling its assets to a selected group of Indian companies, including Reliance – setting off a one-of-a-kind of feud between two of the largest companies in the world in the Indian market over a brick and mortar business.
Last Monday, the Supreme Court of India ruled in favour of Amazon -- halting the Future-Reliance deal until further notice -- against the Delhi High Court's earlier decision to allow the Reliance purchase to go ahead.
Why it matters
For the past few years, Amazon has been aggressively expanding in India, to utilise the growing Indian e-commerce market, where Reliance is one of its primary competitors.
If Reliance's purchase of Future Retail's assets goes through, Reliance will gain access to over 1500 stores in more than 400 cities in India, along with Future's wholesale and logistics -- a major disadvantage for Amazon in India.
If the court ultimately decides to rule in favour of Amazon, it will slow down Reliance's push in the e-commerce where Amazon is currently set to dominate.
What it indicates
The feud between two of the richest men in the world are an indication of the growth potential of the Indian ecommerce market. It also shows how difficult it can get for foreign players to operate in the Indian market.
Analysts claim that Reliance, the local hero, has a home ground advantage under the leadership of Mukesh Ambani who is known as being disruptive. Although the latest round of court ruling suggests a tough battle ahead.
It is highly unlikely that Amazon will give up without a fight since the e-commerce giant will not want to lose years of difficult expansion -- under tight government rules that favour local e-commerce companies over foreign ones -- to Reliance's local advantage.
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