Last September, the world’s largest, richest and most disruption-bearing e-commerce company did something that seemed quite inexplicable in India. Amazon invested the equivalent of a rounding error, Rs 180 crore ($24.8 million) into an Indian departmental store chain biding time in the lesser populated corners of malls all over India—Shoppers Stop. Once a go-to shopping destination for those looking to buy premium, branded clothes, shoes, perfumes, underwear, even jewellery, all under one roof, Shoppers Stop lost its verve as online shopping took off in India.

The pioneer of the one-stop departmental store concept in India back in 1991, Shoppers Stop started small in Mumbai’s Andheri, initially selling only men’s wear, before slowly expanding to women’s and children’s. By the time it listed on the stock exchanges in 2005, it was cool, premium and aspirational, even though it had just 16 stores across India.

But in just five years it would descend into a tailspin of falling profits due to high-interest costs on its debt and sales not keeping up. By 2017 it reported a loss of nearly Rs 20 crore ($2.8 million). This would cascade into accumulated debt of over Rs 550 crore ($75.6 million) by the time Amazon decided to swoop in as a knight in shining armour.

Online retailers have realised that they can’t grow beyond a point and that’s why they are buying stakes in physical retailers

Govind Shrikhande, former managing director of Shoppers Stop

“Over the years, I think it’s lost its experience,” says the head of omni-channel operations of a large retail company, who did not want to be named. “Until and unless, you are a local loyalist, you don’t go to these stores. At least the cool people don’t.”

But why would Amazon, the infinitely-patient, cash-spewing, take-no-prisoners giant want to invest in an Indian apparel and fashion chain struggling to regain its mojo? What possibly could the company that beat all its established competitors in the world’s most competitive and innovative apparel market, America, want with a middling chain in India?

The answer to that starts with sour grapes and thwarted ambitions.

Thrice bitten, fourth-time shy

Amazon has done a tremendous job of scaling up in India in just five years, running neck-and-neck with Flipkart (now owned by Walmart). But there is one area where it struggles and lags woefully—fashion apparel. After years of dogged effort, Amazon’s market share in fashion is estimated to be just about a third of Flipkart’s.

Although, it has had pretty bad luck with acquisition attempts, probably the result of a corporate culture that prefers to build and overrun, than buy.

It tried to buy a stake in online grocery company Big Basket earlier this year, only to lose out to Chinese internet and e-commerce company Alibaba in February.

AUTHOR

Vivek Ananth

After dabbling with an auditing job and then at a software product company, Vivek Ananth has decided to take the plunge into journalism. In his last assignment, Vivek was at Cogencis, a financial newswire. A Chartered Accountant, Vivek completed his post-graduate diploma in journalism from IIJNM Bengaluru in 2016. At The Ken, Vivek will write on the intersection of technology and business.

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