Shoppers Stop Ltd.’s shares surged as much as 20 percent after forging a deal with Amazon.com Inc. that will help the Indian retailer boost revenue and add 25 percent more stores.
Shoppers Stop will raise 1.8 billion rupees ($28 million) selling a 5 percent stake to Amazon.Com NV Investment Holdings LLC, the Mumbai-based company said late Saturday. It also agreed with Amazon’s local unit to set up experience centers -- which let customers test out the products available online -- across Shoppers Stop’s network of 80 bricks-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, Shrikhande said. Chief Executive Officer Jeff Bezos, who has allocated $5 billion toward Amazon’s expansion in India, will gain greater access to smaller towns in the world’s second-most popular nation as the e-commerce giant seeks to secure an advantage over local rivals.
“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,” 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 percent of revenue from online sales by 2020 from 1.2 percent, Shrikhande said. The company’s board approved the issuance of 4.4 million shares to a unit of Amazon for 407.78 rupees ($6.28) apiece.
Shares of Shoppers Stop surged as much as 20 percent, headed for the biggest increase since April 2009. They traded at 478.15 rupees, up 14 percent, as of 10:48 a.m. in Mumbai. They have climbed 66 percent this year, compared with the 19 percent jump in the benchmark S&P BSE Sensex.
Both the companies will gain from the deal, said Harminder Sahni, founder and managing director of consulting firm Wazir Advisors.
“Only 5 percent of sales are happening via online in the case of clothing, and Amazon can’t ignore the remaining 95 percent in India as people still want to touch and feel clothes,” said Sahni. “For Shoppers Stop, this deal gives access to technology and new channel of distribution.”
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 percent 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 Shrikhande.
© Copyright 2024 Bloomberg News. All rights reserved.