Mukesh Ambani, Asia’s richest man, will bring 7-Eleven Inc.’s convenience stores to India, adding to his burgeoning retail empire in the world’s only billion-people-plus consumer market that’s open to foreign firms.
Mr Ambani’s Reliance Retail Ltd. secured the pact just days after troubled supermarket operator Future Retail Ltd. terminated its own agreement with one of the world’s biggest convenience chains. The first 7-Eleven store will open Saturday in a Mumbai suburb, and will be followed by a further “rapid rollout” starting across India’s financial hub, Reliance Retail said in a statement Thursday, without providing financial details.
Reliance scooped the transaction after indebted Future Retail this week said it ended the agreement it inked with 7-Eleven in 2019 by mutual consent after it was unable to open the brand’s stores or pay franchisee fees. Mr Ambani is locked in a bitter court battle with Amazon.com Inc. for the assets of Future Retail, which is one of the biggest brick-and-mortar chains in India.
The move is part of the powerful tycoon’s wider ambition to seize India’s growing formalized retail space. Reliance is expanding its foothold at a rapid rate, adding 1,500 new stores last year to a total of nearly 13,000, Mr Ambani said at a shareholders’ meeting in June. The shares of Mr Ambani’s flagship Reliance Industries rose as much as 1.6% Thursday.
“India is the second-largest country in the world and has one of the fastest-growing economies,” 7-Eleven’s President and Chief Executive Officer Joe DePinto said in the statement. “It’s an ideal time for the largest convenience retailer in the world to make our entry into India.”
7-Eleven’s entry also comes at a fortuitous moment as India enjoys a relative lull of Covid-19 infections after a devastating wave battered the country just months ago. Daily cases are now hovering near a 7-month low and lockdown restrictions have largely been lifted across the country as India’s vaccination drive gains momentum.
Many foreign firms have long coveted access to India’s market of about 1.4 billion people in a country where discretionary spending in on the rise. However, they have faced considerable hurdles to entry and political opposition given the ubiquity of the kirana store, small-scale mom-and-pop shops that account for about three-quarters of India’s retail landscape.
“To make a dent, Reliance will need to have similar penetration over time,” said Utkarsh Sinha, managing director of Mumbai-based Bexley Advisors Ltd. “One tailwind in their favor is going to be the market’s affinity for brands: as long as they are able to build it up, they can cause a shift in shopping behavior.”
The deal between the two companies is a “good fit” that can harness Reliance’s digital reach and gives Mr Ambani a “last-mile linkage to the consumer,” according to Saloni Nangia, president at retail consultancy Technopak Advisors Pvt.
“The landscape is changing with kiranas also becoming digitally assisted and that’s going to be the largest growing segment in India,” she added.
Mr Ambani’s tie-up with 7-Eleven is also another sign of the increasing stranglehold a handful of dominant Indian conglomerates are exerting on India’s retail space, as they increasingly act as a gateway to major foreign investment.
Many global companies, from Facebook Inc. to Starbucks Corp. have gained entry to the country’s massive market in recent years via deals with sprawling Indian players, including Reliance and Tata Group, which have also aggressively acquired home-grown startups.
“The larger business groups who are well funded are taking a larger share,” Ms Nangia said. “It is getting consolidated between four and five players — Reliance has the largest share.”