Flipkart Acquires a 7.8% stake in Aditya Birla Fashion as Indian Walmart e-commerce company moves into the apparel category in one of the largest retail markets in the world.
The e-commerce group is paying $ 203.8 million for its stake in Aditya Birla Fashion and Retail, a conglomerate that operates over 3,000 stores including clothing chain Pantaloons. As part of the strategic partnership "pioneering", Flipkart will also sell and distribute various brands from Aditya Birla Fashion and Retail. (For example, the Indian fashion retail giant has the right to sell Forever 21 merchandise in India.)
Friday's announcement is the latest in the intense battle between Flipkart, Amazon, and Mukesh Ambanis Reliance Retail to determine how Indians shop. As Flipkart and Amazon try to expand their share of the growing Indian e-commerce market, Ambanis Reliance Retail is slowly expanding into the digital space.
Reliance Retail is the largest retail chain in India – a head start built upon the acquisition of much of Future Retail, India's second largest retail chain. Future Group and Amazon are arguing separately about the contract between the Indian company and Reliance Retail. Amazon claims that the Future Group's sale of companies to Reliance Retail was a breach of contract. (Amazon, which has invested in a Future Group company, had the right of first refusal for future business of Future Retail.) According to local media reports, Amazon had also agreed a stake in the Indian company with Aditya Birla Fashion and Retail.
"This partnership is a strong confirmation of India's growth potential," said Kumar Mangalam Birla, chairman of the Aditya Birla Group, which operates the fashion retail company in a statement on the stock exchange. "It also reflects our strong belief in the future of the Indian apparel industry, which will reach $ 100 billion over the next 5 years."
He added that the company will use the fresh capital to strengthen its balance sheet. This isn't the first time Aditya Birla Fashion has pushed e-commerce forward. Abof launched it in 2015 but the company failed and closed two years later.
Kalyan Krishnamurthy, CEO of Flipkart Group, said the two companies would work towards “bringing a wide range of products to fashion conscious consumers in a variety of retail formats across the country. We look forward to working with ABFRL and its well-established and extensive fashion and retail infrastructure to capitalize on the promising opportunities of the clothing industry in India. "
Flipkart already dominates online clothing sales in India thanks in part to Myntra, a fashion e-tailer it bought in 2014. Over the years, the Walmart company has made several other investments in strengthening its fashion category. In July, Flipkart invested $ 35 million in Arvind Fashions, part of a decade-old Indian retail giant.
Online apparel sales are valued at $ 7 billion, according to research firm Forrester. After smartphones, this is the largest category for e-commerce giants in India.
Amazon has also signed several contracts with offline retail chains in India. In 2018, the company acquired parts of the More supermarket chain from the Birla Group. It has also bought stakes in the department store chain Shoppers Stop.