The deal allows Future to sell each of its lucrative 45-odd private labels online while for Amazon, it helps expand its apparel footprints.
On Monday, Kishore Biyani's Future Group announced it was tying up with Amazon India, where it would sell products from its private labels using the online retailer's website.
The move comes a week after Biyani cried foul over the pricing strategy pursued by Flipkart during its Big Billion Day mega sale where he accused the e-tailer of indulging in predatory pricing by selling below cost.
However, even as frictions between online and offline retailers increase, the Future tie-up comes at the right time as it will offer the Biyani-led group a new and increasingly-popular avenue to sell some of its products, while also offering breathing space to the company to prepare its own online plans.
While for Amazon, the tie-up helps in expanding its fledgling foray into apparels -- several of Future's big private brands are in the space -- an area dominated by players such as Myntra and Jabong.
The Future Group, which runs popular format stores such as Big Bazaar, HomeTown and eZone among others, owns around 45 private labels across categories.
According to a report in the Economic Times, Future's private brands fetch it at least 15 percent higher margins compared to other brands.
The online-retail market in India has been fast-growing, from less than half a billion five years back to about USD 5 billion today, even though it is only about 1 percent of the overall retail industry.
According to report by TechnoPak, it is poised to increase to USD 32 billion by 2020, spurred by increasing Internet penetration and aggressive pricing strategies by ecommerce firms flush with investor cash, while the overall retail industry is expected to double.
The ecommerce industry is dominated by young upstarts such as Flipkart and Snapdeal (apart from US giant Amazon) in the general space and Myntra and Jabong in apparels.
Brick-and-mortar retailers, however, have found making the transition from offline to online difficult, with Future's own ventures such as Futurebazaar.com turning out to be not so successful.
Biyani had recently announced the launch of Big Bazaar Direct , which would turn Big Bazaar into an omni-channel format, and from where customers can order Big Bazaar products online.
Tata's electronics-goods store Croma, which has an ecommerce venture of its own, also announced a tie-up with Snapdeal to sell some of its products.
Future Retail stock price
On October 14, 2014, at 14:14 hrs Future Retail was quoting at Rs 115.35, down Rs 0.25, or 0.22 percent. The 52-week high of the share was Rs 147.85 and the 52-week low was Rs 63.30.
The company's trailing 12-month (TTM) EPS was at Rs 3.14 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 36.74. The latest book value of the company is Rs 127.73 per share. At current value, the price-to-book value of the company is 0.90.
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