'The Stores Are Gone': How Reliance Stunned Amazon In The Battle For The Retail Of The Future In India

Reliance began a covert takeover of Future stores on February 25th.
Much of Future’s leadership was in the dark about the source of the takeover.
Reliability for rebranding stores, keeping future employees at the sources
Negotiations start after takeover of Amazon and Future stores

MUMBAI, March 6 – At a large Future Retail (FRTL.NS) supermarket in Mumbai last week, workers unloaded hundreds of bright blue food crates belonging to India’s largest retailer Reliance.

Potential buyers were turned away by security, frustrated by the closed state of the store, which still bears the sign of Future’s biggest brand, Big Bazaar, but is likely to be rebranded as a Reliance outlet soon.

Similar scenes are playing out across India as Reliance Industries (RELI.NS), the largest Indian conglomerate run by Mukesh Ambani, the country’s richest man, moves forward with a shocking virtual takeover of valuable retail real estate that Amazon.com Inc. sought to take part in the property.

A high-profile acrimonious dispute between corporate titans, 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 takeover of Reliance began very quietly on the night of February 25, when its employees began arriving at Future stores. According to people with direct knowledge of the matter, many in Future’s management were in the dark about the plans, as store workers from across the country frantically began calling.

“It was tense, everyone was panicking. We didn’t know who they were. They wanted access and the elderly didn’t know about it,” a New Delhi Big Bazaar employee said, describing what happened around 8 p.m. that day.

Announcements were made at a Future store in Sonipat, northern Haryana, asking customers to leave as Reliance took control. In Vadodara, in western Gujarat, Future employees who arrived at work the next morning were asked to return home without explanation, according to another source.

Citing Future’s unpaid payments, Reliance has taken control of about 200 Big Bazaar stores and plans to take over 250 more Future outlets. Collectively, they represent the pearls of the Future retail chain and about a third of all Future outlets. More

Although Reliance did not play a large public role in the litigation, within months, it took over many of the leases owned by cash-strapped Future, India’s No. 2 retailer and former Amazon business partner, within a few months, according to sources.

Reliance’s sudden takeover of stores appears to have resulted in what some analysts are calling a coup d’état that robs Amazon of a chance to unravel Future’s asset transfer to Reliance. This is despite a series of legal battles won by the American e-commerce giant to date that are blocking a 2020 deal announced between the two Indian companies.

“What will Amazon be fighting for now?” said a source close to the US company familiar with the litigation. “The shops are gone.”

Representatives for Reliance, Amazon and Future did not respond to Reuters inquiries regarding this article. The sources asked not to be named due to the sensitive nature of the dispute.

AFTER THE ACQUISITION, NEGOTIATIONS

Future Retail said on February 26 that it was “cutting its operations” to cut losses, although it did not mention Reliance in its statement. Future Group debt as a whole exceeds $4 billion.

Reliance plans to keep Future employees at the stores it takes, sources say.

Amazon, which has a stake in a separate division of the Future Group that it claims prevents Future from selling retail assets without its permission, has called supermarkets and other stores an “essential” chain in the sector with $900 billion in annual revenue.

Legal wrangling over time acquired ever higher stakes and was accompanied by ugly rhetoric. At one point, Amazon demanded that future CEO Kishore Biyani be imprisoned for disobeying a legal order. And Future once compared the Amazon to Alexander the Great and his “relentless drive to scorch the earth.”

But on Thursday, six days after Reliance’s move, Amazon in a Supreme Court hearing unexpectedly called for cordial negotiations to end the dispute – a proposal Future agreed to.

“People have taken over stores… let’s at least talk,” said Amazon lawyer Gopal Subramanium.

Discussions are expected to start soon. More

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

“If anyone should have foreseen this, it’s Amazon and they should have prepared for it,” said Devangshu Datta of consultancy Third Eyesight.

“Obviously they didn’t.”

Reporting by Aditya Kalra in New Delhi and Abhirup Roy in Mumbai; Additional reporting by Francis Mascarenhas in Mumbai and Amit Dave in Ahmedabad; Editing by Edwina Gibbs

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