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Last week, Amazon shook the grocery industry to its core when it acquired upscale grocery chain Whole Foods Market Inc. (Nasdaq: WFM) for a hefty $13.7 billion.
Big grocery and supermarket chain stocks plummeted on June 16 when the deal was announced. Kroger Co. (NYSE: KR) sunk over 9.2%, Supervalu Inc. (NYSE: SVU) dropped 14.4%, and Wal-Mart Stores Inc. (NYSE: WMT) lost 4.7%. Meanwhile, AMZN enjoyed a nice 2.44% gain.
Now the online-focused retailer has its sights set on a new challenge: conquering India's $400 billion grocery market.
You see, Amazon is reportedly in talks to purchase India's largest online grocer, BigBasket.
BigBasket, a five-year-old startup valued at $450 million, operates in about 25 cities across the country.
According to The Times of India, the Indian grocery firm and the American e-commerce leviathan have entered a 60-day exclusivity agreement. Over the next two months, BigBasket cannot hold talks with any other potential buyers about a sale. However, the retailer can still reach out to investors to raise more capital.
This isn't Amazon's first rodeo in the world's fastest-growing economy. In fact, the company has been involved in the Indian e-commerce space as far back as 2013, when AMZN offered only books and movies to consumers. Since then, AMZN has expanded and now offers a full range of products on its Indian marketplace. Now, Amazon is taking the next step.
This investment, if it goes through, will be a huge win for Amazon. Online grocers have only a 4% share in the grocery market, according to a report by Technopak Advisors, which means Amazon will be getting into the market at a time with limited competition.
And this is likely just the start…
Amazon plans to invest close to $500 million just in online food retailing in India, according to a June 13 report from Bloomberg. According to the same report, Amazon CEO Jeff Bezos has also vowed to spend $5 billion in India all together in an effort to compete against local rivals.
For investors, this presents a huge opportunity…
How to Play Amazon Now
"Amazon will dominate every market it enters – a disruptive company like Amazon can turn an industry on its side," said Money Morning Chief Investment Strategist Keith Fitz-Gerald, who has long been bullish on Amazon, on April 10.
And given Amazon's aggressive moves as of late, it looks like the grocery industry – in both America and India – is next.
"It's Amazon versus everybody else, and any retailer without an Amazon defense strategy is living on borrowed time," said Keith.
As an investor, there are two ways you can play this…
"Longer term, there's no question you want to own shares of Amazon," he said.
But Amazon currently trades at $994.06 a share – just a hair away from $1,000.
"[For that price] you can either buy 100 shares or a really nice house in the competitive San Francisco Bay area," said Keith.
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