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Amazon to Use Mom-and-Pop Shops as Delivery Points in India

Zacks Equity Research

Amazon AMZN is sparing no effort to strengthen its e-commerce business in India. This is evident from its latest tie-ups with thousands of mom-and-pop stores (popularly known as Kirana stores) in India.

Notably, the company will utilize these stores as its delivery points in order to enhance delivery infrastructure in the country.

Further, the latest move will strengthen the company’s pilot program namely “I have Space,” which has now reportedly expanded to Tier 1, 2 and 3 cities of India. The program focuses on building relationships with local neighborhood or kirana shops.

Under this program, Amazon has partnered with more than 20,000 such shops so far across 350 cities of India.

We believe the recent partnerships are expected to drive Amazon’s momentum across the country’s shoppers and mom-and-pop shops. Consequently, this will bolster the company’s presence in retail space of India, which holds immense prospects.

This will aid the company in winning investor confidence.

Coming to price performance, Amazon has returned 14.2% over a year, underperforming the industry’s rally of 22.4%.

Nevertheless, Amazon’s growing India-based initiatives are expected to yield good returns. Moreover, these initiatives bode well for the company’s strengthening global footprint. This is likely to help the stock to rebound in the near term.



Social Benefits, Competitive Advantage

We believe the company’s latest move is also likely to benefit socially.

The move will not only benefit Amazon but also cater to the interests of the mom-and-pop stores as owners of these stores will get a chance to earn extra income by acting as delivery partners for Amazon.

Further, these shops play a vital role in daily lives of customers. In fact, customers in India have a very strong preference for these shops as these offer almost every kind of product.

Thereby, Amazon by partnering with these store owners will be able to deliver products at an ultrafast speed, which in turn will hugely benefit customers.

On the back of these deals, Amazon goes one up against Walmart WMT, which is also trying to build its mom-and-pop network.

Notably, Walmart-owned Flipkart has recently invested $30 million in ShadowFax that leverages neighborhood stores for inventory storage and delivery purpose.

Amazon.com, Inc. Revenue (TTM)

 

Amazon.com, Inc. Revenue (TTM)

Amazon.com, Inc. revenue-ttm | Amazon.com, Inc. Quote

Amazon’s Strong Endeavors in India

Apart from the latest move, Amazon recently announced that it intends to create 1 million jobs in both direct and indirect form in India by 2025.

Further, the company announced $1 billion investment in the country with the help of which it plans to build digital centers in 100 Indian cities and villages in order to bring more than 10 million small and medium businesses online.

Additionally, it entered into an agreement with Future Retail that will authorize it as the official online sales channel for Future’s retail stores. Furthermore, Amazon has reportedly given its approval to acquire 49% stake comprising both voting and non-voting shares in Future Coupons, a Future Group entity.

The company has acquired 49% in More, an Indian food and grocery supermarket chain. Amazon also owns 5% in Shoppers Stop.

All these aggressive strategies of Amazon are likely to give a tough competition to Walmart, Alibaba BABA and eBay EBAY, which are also leaving no stone unturned to expand their presence in India.

Currently, Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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