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Jeff Bezos squares up to Mukesh Ambani in India ecommerce battle

Future Group dispute comes as Reliance looks to challenge Amazon in online retail.

Amazon chief executive Jeff Bezos is squaring up against Reliance Industries chairman* Mukesh Ambani over the Indian retailer Future Group, drawing battle lines between two of the world's richest men over the country's lucrative ecommerce market.

On Sunday, the Singapore International Arbitration Centre granted an emergency interim order in Amazon’s favour, after the US tech group filed a complaint connected to a $3.4bn deal that Reliance struck with Future Group in August.

Amazon, which acquired an indirect minority stake in the retail and fashion conglomerate last year, alleged that Future's sale of its retail, wholesale, logistics and warehousing businesses to Reliance breached its pre-existing contract, which included a right of first offer and a non-compete clause. The deal is now on hold until a final decision is given.

The legal fight comes as Amazon and Reliance are set to go head to head in a battle for dominance in India’s booming ecommerce market, which will be worth $86bn by 2024, according to research firm Forrester. The stakes are particularly high for Amazon, which believes India is a big growth market after shutting its online store in China last year.

$5bn Amount Mukesh Ambani’s Reliance Retail has raised from marquee investors

Reliance, which is already India’s biggest offline retailer, with more than 11,000 stores and revenues of $18.5bn last year, has a small presence in ecommerce. But it is embarking on a strategy to dislodge Amazon and Walmart-owned Flipkart, which together control about 70 per cent of the online market in India.

After raising $20bn from global investors for Reliance Jio, his telecom and digital services business, Mr Ambani has since begun another fundraising blitz for his retail arm. Raising more than $5bn from marquee backers so far, his vision is to digitise Reliance Retail and its enormous offline network.

“Now, with the kind of funding Reliance has got, it's evident that they will play in the same [online] markets as Amazon and Flipkart,” said Bernstein’s Rahul Malhotra in Mumbai. “This is the start of a more competitive era.”

‘Ambani is after what Bezos has got’

The battle over Future Retail comes as Amazon and Flipkart are seeking partnerships with bricks-and-mortar retailers in India, part of a push to expand while complying with new regulations limiting foreign players in the ecommerce sector.

Amazon, Reliance and Future Group declined to comment for this article.

The skirmish is the latest setback for Mr Bezos in India after a high-profile trip in January flopped, with the commerce minister saying that the Amazon head’s pledge to invest $1bn to digitise small and medium-sized businesses across the country was no “great favour to India”.

Mr Bezos — who has invested billions in India since starting operations there in 2013 — had been unable to secure a meeting with Mr Modi when he came to New Delhi, said a person close to Amazon. Mr Bezos later had breakfast with Mr Ambani and other industrialists in Mumbai.

“They are big rivals, obviously. Ambani is after what Bezos has got,” said a Mumbai banker. “A typical middle-class Indian kid wants to shop online and he thinks of Amazon, he doesn't think of Reliance Retail or JioMart,” he said, referring to Reliance's online grocery delivery store.

Despite on-and-off talks this year over the possibility of Amazon taking a stake in Reliance Retail, analysts said Mr Bezos was wary of forming a partnership with the powerful Indian tycoon. Mr Ambani, too, was reluctant to hand over any majority stake or control to his rival, people close to Reliance said, hindering any genuine effort to make a deal.

Mr Ambani has been a magnet for investment as he seeks to transform his energy conglomerate into a homegrown tech superpower. He has made no secret of his plans to make Jio Platforms the next internet giant.

“Jio wants the maximum amount of household spending to come to them,” said Satish Meena, a New Delhi-based analyst at Forrester. “They are doing the same thing that they did with telecom, and if they are able to control grocery purchases, they have captured the majority of household spending.”

Future operates some of India's most high-profile retail brands, such as supermarket chain Big Bazaar and premium grocery shop Foodhall. If Reliance’s tie-up with the group went through, Mr Ambani’s empire would control 40 per cent of the country’s formal grocery market.

‘Why should a foreign company dominate?’

Despite lagging Amazon and Flipkart in its online user experience, analysts say Reliance has the advantage of being on the right side of a growing tide of protectionist policies in India.

“In Mumbai business circles, Amazon is viewed as the new East India Company of sorts,” one person close to Reliance said, referring to the private British corporation that ruled large swaths of the Indian subcontinent in the 18th century. “Why should a foreign company dominate when we have homegrown giants — from Ambani to Tata and Birla?”

The shifting ecommerce regulations in the country have raised familiar questions over New Delhi's treatment of its biggest foreign investors, with Vodafone spending years fighting a €3bn tax dispute with Indian authorities related to an acquisition of a local operator.

After Walmart paid $16bn for Flipkart in 2018 — the largest single foreign investment in the country — New Delhi changed its rules for the sector just months later, banning foreign companies from keeping their own inventory and allowing them only to operate as online “marketplaces” connecting sellers to buyers.

To work around these rules, Amazon and Flipkart have been picking up stakes in Indian retailers to deepen their supply chains. Amazon holds stakes in department store Shoppers Stop and grocery chain More, part of the Aditya Birla Group. Flipkart on Friday announced that it paid $200m for a 7.8 per cent stake in Aditya Birla Fashion and Retail Limited, which has more than 3,000 stores in the country. 

The outcome of Amazon’s legal battle with Future was difficult to predict, analysts said. Reliance said in a statement it “intends to enforce its rights and complete the transaction . . . with Future group without any delay”.

At the very least, however, the arbitration would buy the US group some time, said Neil Shah, analyst at Counterpoint in Mumbai.

“Amazon might put a spanner in the wheel to try and slow down the Reliance expansion,” said Mr Shah. “But Reliance is making big moves and is a big threat. The ball is in Mr Ambani’s court.”

This story has been amended to state that Mukesh Ambani is the chairman of Reliance Industries. His father, Dhirubhai Ambani, was the founder.


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