E-commerce giant Amazon is gearing up for food retail business in India through a wholly owned subsidiary in India from March. The e-commerce firm will enter the food retail market through its subsidiary Amazon Retail India and will subsequently start a private grocery label to compete with Grofers and BigBasket in the e-grocery segment.
The Seattle-based e-commerce giant had received the approval from Department of Industrial Policy and Promotion (DIPP) in July last year for $500 million investment in online-retailing of food products.
The online food retail venture was initially expected to start during Diwali last year and was delayed due to the segregation of the marketplace and the food retail business.
In 2016, the Indian government allowed 100% foreign ownership in the food retail business.
The proposed $500 million investment will be utilised by Amazon to establish the food retail business entity, separated from its e-commerce marketplace, and to sell directly to consumers.
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In India Amazon isn’t allowed to sell directly to consumers – it can only act as an intermediary by lending its technological platform to local vendors to sell goods.
This is because the new policy prohibits foreign retailers to sell any nonfood items directly to consumers. It only allows a foreign company to open a wholly-owned subsidiary in India to retail food products produced and or manufactured in the country by way of opening stores or online.
The Jeff Bezos led firm was the first company to make a large investment in the food-only retailing sector that India created, allowing 100% foreign ownership in subsidiaries that would sell locally produced food items.
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The e-commerce giant currently offers food products through Amazon Pantry. However, it is currently procured from third-party sellers. Besides, grocery delivery through Amazon Now app is also done via a tie-up with retailers such as Big Bazaar and Hypercity.
Apart from Amazon, online grocers – Bigbasket and Grofers have also received approval for their proposals of investment for food retail. While Bigbasket has proposed an investment of Rs 100 crore, Grofers was looking to invest about $40 million in its food retail unit.
The Report was first published in ET.
