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Retail

Mergers And Acquisitions Accelerate In India's Retail Market, As Competition Increases

Merger and acquisition activity is accelerating in India's retail market, with the 2018 acquisition of Flipkart by Walmart opening the floodgates on a series of high profile ventures.

The Indian retail market is expected to reach a value of $1.4 trillion by 2023, at a CAGR of 10.7% between 2020 and 2023, which in turn is accelerating the move towards retail consolidation, according to industry analysts GlobalData.

Merger Activity

For example, Amazon is in talks with Reliance Industries Ltd to buy a stake in Reliance Retail, while Reliance itself is in dissuasions with Future Group over the potential acquisition of the latter's retail business, which includes Big Bazaar, Easyday Club and smaller businesses such as Nilgiri’s and Heritage Fresh.

The recently announced consolidation of Flipkart and Best Price gives Flipkart better leverage in terms of supply chain and warehousing services, while the launch of JioMart, a business that has seen investment by Google and Facebook, offers massive e-commerce potential.

According to Hrishabh Kashyap, retail analyst at GlobalData, the Best Price deal "prepares Flipkart for the upcoming battle with Amazon and JioMart, especially in the food and grocery business. Flipkart Wholesale, which is expected to start operations next month if it manages to sail through the Competition Commission of India probe demanded by All India Online Vendor Association, will have control over the entire retail ecosystem.”

'Digitisation Drive'

Kashyap added that the COVID-19 pandemic has "accelerated the digitisation drive" among India's retailers, which in turn are facing credit challenges due to a slowdown in demand.

"The crisis has presented an opportunity for Flipkart to bring more sellers under its umbrella and leverage its partnership with Non-Banking Financial Company (NBFCs) such as Aditya Birla Finance, Tata Capital, Flexiloans and LendingKart to offer credits to these sellers during these distressed times, which will help it in expanding its own retail footprint.”

Alternative Payments

Elsewhere, GlobalData's E-Commerce Payments Analytics study found that the Indian e-commerce markets is now valued at INR4.3 trillion ($60.5 billion), up from INR1.7 trillion ($23.7 billion) in 2016.

It said that alternative payments have gained significant prominence among online shoppers in India, with mobile and digital wallets gradually displacing traditional payments such as cash and cards, particularly during COVID-19.

"The recent COVID-19 outbreak has further accelerated the usage of alternative payments as consumers are increasingly using electronic payments to avoid exposing themselves to disease vectors, while merchants are also insisting on the digital mode of payments," commented Ravi Sharma, lead banking and payments analyst at GlobalData.

Google Pay has been one of the main beneficiaries of the growing digitalisation, accounting for a 9.3% share of total e-commerce payments, up from 3.5% in 2019, according to GlobalData.

© 2020 European Supermarket Magazine – your source for the latest retail news. Article by Stephen Wynne-Jones. Click subscribe to sign up to ESM: The European Supermarket Magazine.

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