Amazon to launch food e-retail; Will FDI get in its way?

Amazon food

The foreign online marketplace Amazon is doing quite well in India. Compared to the country’s largest online retail company Flipkart, Amazon has managed to surpass it in terms of growth. The international etailer is constantly experimenting and pushing its limits to increase its earnings. Recently, it mentioned it would be expanding its 2-hour delivery service. It developed a more localised strategy to support its sellers better and launched a city-specific platform for local vendors.

The innovating at Amazon has not ended there. The ecommerce company has applied to the Government of India for permission to invest $500 million in a wholly owned venture that allows it to procure locally produced food and sell it online. If the Indian government approves of this Amazon will be the first foreign etailer to offer this facility online.

Will FDI affect Amazon’s online food venture?

With 100% FDI in play ecommerce companies like Amazon cannot sell products themselves. 100% overseas capital investment is also allowed in processed food retail in India, according to the government’s landmark liberalising policy in the February 2016 budget.

An application has been filed with DIPP by Amazon. DIPP handles FDI in retail and ecommerce claimed a person with knowledge of this development. If approved, Amazon will invest $500 million in the venture over the course of 5 years. And, it will begin selling food items in a matter of 6 months after permission is granted, the person specified.

Amazon’s spokesperson said, “We are excited by the government’s continued efforts to encourage FDI in India for a stronger food supply chain,” an Amazon spokesperson said. “We have sought an approval to invest and partner with the government in achieving this vision.”

The application from the ecommerce company will be a showpiece for the Indian government, which happens to be unable to lure in foreign manufactures or retailers after it approved the food retailing policy which it claimed would benefit farmers and provide jobs to the unemployed.

Currently, only hyperlocal grocery delivery firms like Grofers and Bigbasket applied under this category. Walmart Stores Inc. did not consider signing up for this policy because it does not want to sell only a small margin of food items. The retailer wanted for non-food items to be included as well.

Very little is known about Amazon’s plans for its new food venture. Like, will its venture be the same as Amazon Pantry and Kirana Now? Or will it be something entirely different? Also, the kind of food items the etailer will offer is a bit of a mystry. 

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