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Is Amazon (AMZN) Eyeing the Indian Grocery Market Next?
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Amazon.com Inc. (AMZN - Free Report) is gearing up to be a major retailer in the rapidly growing Indian grocery market. Apart from being a prominent e-commerce platform provider, the company is planning to open brick-and-mortar stores in the country.
Reportedly, the company is seeking license under a June legislation that now allows 100% foreign direct investment (FDI) for companies that sell locally produced or sourced food items.
If Amazon eventually gets the government’s nod, India would be the second country after the U.S. where Amazon is going the brick-and-mortar way.
Notably, the company’s first brick-and-mortar store branded “Amazon Go” is expected to open in Seattle this year and will offer a “check-out free” experience to customers. The company is also planning to open its 10th brick-and-mortar bookstore in Bellevue, WA.
We note that Amazon’s shares appreciated 49.8% in the last one year compared with the Zacks Internet Commerce industry’s gain of 38.5%. International expansion is expected to back the momentum going ahead.
The First Mover Advantage
Amazon is the first global player to seek advantage from the Indian government’s push to channelize FDI toward improving the nation’s food supply chain. The e-commerce giant has sought government’s permission to open food-only outlets integrated with an online platform to sell locally produced food items.
The company plans to open a wholly-owned subsidiary to conduct this business. It is planning an investment of around $522 million in this endeavor over a period of five years.
Last year, Amazon announced that it will invest $3 billion in its India operations in addition to the $2 billion announced in 2014. The company has already invested more than $1 billion in India. Currently 20 fulfillment centers are operational across 10 Indian states. Recently, the company launched its popular Amazon Prime video.
Amazon’s e-commerce marketplace is currently operational in India and faces tough competition from home-grown Flipkart and Snapdeal. The company looks geared up to take advantage of the ongoing e-commerce boom in India along with growing adoption of smartphones.
The attention has shifted to India as competition from Alibaba (BABA - Free Report) has intensified in China along with slowing e-commerce growth. Recently, Alibaba made an attempt to strengthen its footprint in India by investing $177 million in Paytm E-Commerce.
The increasing involvement reflects Amazon’s intent to expand its brand visibility in India.
We believe that if Amazon could successfully go the brick-and-mortar way in India, it will prove to be a huge competitive advantage against locals as well as bigwigs like Wal-Mart (WMT - Free Report) and Alibaba.
The Bigger Picture
Amazon’s accelerated push into the offline market makes sense as competition in online retail is heating up. Traditional retailers have always provided the strongest competition and a number of them are running e-commerce sites as well.
Additionally, the increased use of the Internet in both developed and developing economies is attracting other players to the space. While affiliation programs are being used by big players such as eBay (EBAY - Free Report) , several smaller companies could also find their own niche.
Apart from giving a tough competition in China, Alibaba is now targeting the U.S. market, which will greatly increase competition for Amazon. Further, since Amazon’s first mover advantage is likely to moderate over time, some market share erosion seems inevitable.
Amazon seems to be gearing up well in advance should online retail ever bottom out.
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Is Amazon (AMZN) Eyeing the Indian Grocery Market Next?
Amazon.com Inc. (AMZN - Free Report) is gearing up to be a major retailer in the rapidly growing Indian grocery market. Apart from being a prominent e-commerce platform provider, the company is planning to open brick-and-mortar stores in the country.
Reportedly, the company is seeking license under a June legislation that now allows 100% foreign direct investment (FDI) for companies that sell locally produced or sourced food items.
If Amazon eventually gets the government’s nod, India would be the second country after the U.S. where Amazon is going the brick-and-mortar way.
Notably, the company’s first brick-and-mortar store branded “Amazon Go” is expected to open in Seattle this year and will offer a “check-out free” experience to customers. The company is also planning to open its 10th brick-and-mortar bookstore in Bellevue, WA.
We note that Amazon’s shares appreciated 49.8% in the last one year compared with the Zacks Internet Commerce industry’s gain of 38.5%. International expansion is expected to back the momentum going ahead.
The First Mover Advantage
Amazon is the first global player to seek advantage from the Indian government’s push to channelize FDI toward improving the nation’s food supply chain. The e-commerce giant has sought government’s permission to open food-only outlets integrated with an online platform to sell locally produced food items.
The company plans to open a wholly-owned subsidiary to conduct this business. It is planning an investment of around $522 million in this endeavor over a period of five years.
Last year, Amazon announced that it will invest $3 billion in its India operations in addition to the $2 billion announced in 2014. The company has already invested more than $1 billion in India. Currently 20 fulfillment centers are operational across 10 Indian states. Recently, the company launched its popular Amazon Prime video.
Amazon.com, Inc. Revenue (TTM)
Amazon.com, Inc. Revenue (TTM) | Amazon.com, Inc. Quote
India Expansion Plans in Focus
Amazon’s e-commerce marketplace is currently operational in India and faces tough competition from home-grown Flipkart and Snapdeal. The company looks geared up to take advantage of the ongoing e-commerce boom in India along with growing adoption of smartphones.
The attention has shifted to India as competition from Alibaba (BABA - Free Report) has intensified in China along with slowing e-commerce growth. Recently, Alibaba made an attempt to strengthen its footprint in India by investing $177 million in Paytm E-Commerce.
The increasing involvement reflects Amazon’s intent to expand its brand visibility in India.
We believe that if Amazon could successfully go the brick-and-mortar way in India, it will prove to be a huge competitive advantage against locals as well as bigwigs like Wal-Mart (WMT - Free Report) and Alibaba.
The Bigger Picture
Amazon’s accelerated push into the offline market makes sense as competition in online retail is heating up. Traditional retailers have always provided the strongest competition and a number of them are running e-commerce sites as well.
Additionally, the increased use of the Internet in both developed and developing economies is attracting other players to the space. While affiliation programs are being used by big players such as eBay (EBAY - Free Report) , several smaller companies could also find their own niche.
Apart from giving a tough competition in China, Alibaba is now targeting the U.S. market, which will greatly increase competition for Amazon. Further, since Amazon’s first mover advantage is likely to moderate over time, some market share erosion seems inevitable.
Amazon seems to be gearing up well in advance should online retail ever bottom out.
Currently, Amazon has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>