Amazon had requested the Indian government for permission to carry out online food retail in the country. The Seattle-based company stated it is ready to invest Ra.3,500 crores in India for a period of five years, through its online food business. It will be sourcing the services of third parties and its own private-labels for food items that will be acquired and packaged locally.
Amazon shows a clear segregation of food products and other retail items it sells on its platform, the government advised the ecommerce company. The online marketplace will likely comply with this advice to get a move on with this ecommerce project. According to persons aware of this development, Amazon is expected to provide a formal response soon.
To do so, the people familiar with the matter stated that items for direct retailing to customers will be separately stored in different warehouses.
After the government permitted 100% foreign direct investment in online food retail, Amazon is the first big time international company to ask for permission to invest in this from of ecommerce.
However, companies with foreign funding are not yet allowed to directly sell other commodities online. This is why stock segregation is essential.
The people stated above revealed that Amazon will probably be a food product seller on its own platform, through a subsidiary of its own. Third-parties currently sell food produce on Amazon Pantry and Amazon Now. It is likely that the company will use these for direct retail too.
With Amazon Pantry, customers can order 15kgs worth of produce. This is delivered to them on the next day at Rs.20, for shipping purposes.
With Amazon Now app customers are allowed to order daily use items from malls and big outlets. These are guaranteed to be delivered in 2 hours-time.
Amazon is looking to inject a large amount of money into Indian ecommerce, through its food business.
A spokesperson for Amazon said, “We have sought an approval to invest and partner with the government in achieving this vision.”
But, no other details about the same were provided.
The foreign etailer is the first of its kind to show interest in food retail in India. This is a segment with great potential but very small margins at the moment. Other etailer like Wal-Mart Stores believe that selling only food online does not make any business sense.
But, according to an application sent to the body that facilitates investments, i.e. the Department of industrial Policy and Promotion (DIPP), Amazon mentioned its intention to sell “food products (produced or manufactured in India) to customers at any location through any channel, offline or online, including ecommerce, across India.”
Amazon also said it would develop infrastructure like:
This way farmers can cut out waste and intermediaries involved in the food supply chain.
The aim behind 100% FDI in food retailing was to assist farmers. If organised retail businesses obtain produce directly from farmers, middlemen cost will fall and producers will be able to control the price of their products better.
So, once Amazon’s food venture is approved the next hurdle is making profits here. Existing players in this field are still nowhere near to making profits. But, maybe Amazon might figure out a way around this.
Leave a Comment
