‘Shops are gone’: How Reliance stunned Amazon in India’s future retail battle

MUMBAI, March 6 (Reuters) – In the big future retail market (FRTL.NS) In a Mumbai supermarket last week, workers were unloading hundreds of bright blue grocery boxes belonging to India’s largest retailer Reliance.

Potential customers were turned back by security, frustrated by the closed state of the store that still carries the banners of the future biggest brand, Big Bazaar, but is likely to be soon rebranded as a Reliance outlet.

All over India, similar scenes are played as Reliance Industries (RELI.NS)India’s largest conglomerate run by Mukesh Ambani, the country’s richest man, is going ahead with a surprise de facto acquisition of prized retail real estate that Amazon.com has been keen on acquiring.

The high-profile, bitter dispute between the corporate giants, in which Amazon sought to block Reliance’s planned $3.4 billion purchase of Future Group’s retail assets, is currently before India’s Supreme Court.

The acquisition of Reliance began in full cover on the night of February 25th when its employees began arriving in future stores. Many in the Future Department were aware of the plans as store employees from across the country began calling frantically, according to people with direct knowledge of the matter.

Describing what happened around 8 pm that day, an employee at Big Bazaar store in New Delhi said: “The situation was tense, everyone was in a panic. We didn’t know who they were. They wanted to arrive and the elderly were not aware of it.” , describing what happened around 8 p.m. that day.

One of the sources said that at the Future store in the northern Haryana town of Sonipat, advertisements were made asking customers to leave with Reliance in control. Another source said in Vadodara in western Gujarat, future employees who arrived for work the next morning were asked to go home without explanation.

Citing unpaid payments by Future, Reliance has taken control of the operations of about 200 Big Bazaar stores and has plans to take over 250 of Future’s retail outlets. Combined, they represent the crown jewels of the future retail network and about a third of all Futures outlets. Read more

Although Reliance did not play a major public role in the legal dispute, it did, for several months, assume several leases held by cash-strapped Future, India’s No. 2 retailer and separate Amazon business partner, for several months.

Reliance’s sudden acquisition of the stores appears to have shattered what some analysts describe as an honor coup that spoils Amazon’s chances of untangling the transfer of Future assets to Reliance. This is despite a series of legal battles that the US e-commerce giant has won so far to block the announced 2020 deal between the two Indian companies.

What will Amazon fight now? A source close to the US company is aware of the legal dispute. Shops have disappeared.

Representatives for Reliance, Amazon and Future did not respond to Reuters inquiries for this article. Sources requested anonymity due to the sensitive nature of the dispute.

After the takeover, the conversations

Future Retail said on February 26 that it was “reducing operations” to cut losses although it made no mention of Reliance in its statement. The Future Group as a whole has more than $4 billion in debt.

Sources said Reliance plans to keep Future employees in the stores it manages.

Amazon, which has a stake in a separate unit of Future Group, which it says is preventing Future from selling retail assets without its permission, has described supermarkets and other stores as an “irreplaceable” network in a sector with annual revenue of $900 billion.

Legal disputes over time became increasingly risky and were characterized by ugly rhetoric. At one point, Amazon sought to have future CEO Kishore Biyani in jail for violating a legal order. Future once compared the Amazons to Alexander the Great and his “ruthless ambition to burn the earth”.

But on Thursday, six days after Reliance’s move, Amazon in a Supreme Court hearing unexpectedly called for amicable talks to end the dispute — a proposal the future agreed to.

“People have taken over the stores … let’s at least have a conversation,” Amazon attorney Gopal Subramanium said.

Discussions are expected to start soon. Read more

Whatever the outcome of the talks, analysts say Amazon has seriously underestimated Reliance.

“If anyone was to see this coming, it had to be Amazon and they should have prepared against it,” said Devangshu Dutta of Third Eyesight retail consultancy.

“Obviously they didn’t.”

Additional reporting by Aditya Kalra in New Delhi and Abhirop Roy in Mumbai; Additional reporting by Frances Mascarenhas in Mumbai and Amit Dev in Ahmedabad; Editing by Edwina Gibbs

Our criteria: Thomson Reuters Trust Principles.