Amazon to launch online food retail store during Diwali

After getting approval from Department of Industrial Policy and Promotion (DIPP) for $500 million investment in online-retailing of food products, Amazon is set to make an opening in India during the Diwali season, according to an ET report.

The company has applied for the license early this year.

The report stated that the e-commerce major will make its entry through subsidiary Amazon Retail India Pvt Ltd; subsequently plans to start a private grocery label in India.

The company’s operation in India is likely to follow Amazon Fresh in the UK and US, where it delivers food to customers on the same or next day for a fee.

At present, Amazon acts as a marketplace in India, collecting and distributing foodstuffs and dry goods from grocers. With the new licence, the company can keep inventory and sell it to consumers.

The Seattle-based company is looking to tap India’s rapid shift to online and mobile shopping, which is expected to rise from $10 billion in 2015 to $47 billion in 2020 as per eMarketer, a US research group.

Besides, after providing the approval, the government is also keen that Amazon open brick-and-mortar stores in India but the company is yet to decide on this.

After permitting 100 per cent foreign direct investment (FDI) in the food processing sector, the new rule 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.

A week ago, commerce and industry minister Nirmala Sitharaman told Parliament the government has approved three foreign direct investment proposals in food retail, including Amazon.

Online grocery service providers Grofers and Supermarket Groceries Supplies are the other two entities who have been approved by the department of industrial policy and promotion (DIPP) for FDI investment in India.

The government opening the food retail sector will see a lot of players entering the market. Flipkart and Paytm are also bracing up to get into grocery space soon.

With 100 per cent FDI in food retailing, the government intends to encourage organised retailers to source goods directly from farmers and reduce the role of middlemen who usually eat-up major part of earnings and often inflate market rices.