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[MUMBAI] Amazon.com Inc's investment in retailer Shoppers Stop Ltd will help the Indian company boost revenue and add 25 per cent more stores, while the US firm expands its reach into smaller towns in the world's second-most populated nation.
Shoppers Stop will raise 1.8 billion rupees (S$37.3 million) selling a 5 per cent stake to Amazon.Com NV Investment Holdings LLC, the Mumbai-based company said in an emailed statement late Saturday. As part of the deal, Amazon experience centres - which let customers test out the products available online - will be set up across Shoppers Stop's network of 80 brick-and-mortar stores in India. The company will add 20 stores in the next four years, Govind Shrikhande, managing director of Shoppers Stop said.
The alliance will help Shoppers Stop tap part of the 400 million monthly visitors to Amazon's online stores, Mr Shrikhande said. Chief executive officer Jeff Bezos has allocated US$5 billion toward Amazon's expansion in India as it seeks to secure an advantage over local rivals in the South Asian nation. The e-commerce giant has a lot riding in the country after its washout in China, where the dominance of Alibaba Group Holding Ltd and other domestic players made Amazon's entry difficult.
"The partnership with Amazon will really accelerate our revenue from online sales and we expect it to double every year for the next three years," Mr Shrikhande, said in an interview on Sunday. "Amazon will give us space in its fashion segment online where its users will have access to about 400 brands from our catalog." Shoppers Stop, which has stores in smaller cities including Durgapur, Aurangabad and Kolhapur, is targeting 10 per cent of revenue from online sales by 2020 from 1.2 per cent, Mr Shrikhande said. The company's board approved the issuance of 4.4 million shares to a unit of Amazon for 407.78 rupees apiece. Shoppers Stop's shares, which have risen 45 per cent this year, fell 3 per cent to 418.1 rupees in Mumbai on Friday.
Shoppers Stop, which sells cosmetics to clothing and home appliances at its outlets, will have an exclusive flagship store on Amazon's Indian site where it will retail its entire portfolio, the company said.
The deal will be Amazon's first investment in a publicly traded retailer in India. Shoppers Stop will issue 5 per cent of post-issue share capital to the Amazon unit.
"The investment is strategic and one really can't read too much about whether the Amazon unit will raise its stake in the future," said Mr Shrikhande.