Amazon gets govt nod to invest in food retail in India
Armed with the government’s approval to retail food products in India, e-commerce giant Amazon.com Inc. can now potentially invest in building out a full-fledged food retail business and sell food products through its wholly owned subsidiary in India.
This will provide a serious challenge to existing online grocery stores such as BigBasket and Grofers, according to two executives with direct knowledge of the matter.
The approval also potentially allows Amazon to launch its own private label category for the food business, the executives said, asking not to be identified. On Monday, PTI first reported that the department of industrial policy and promotion had approved Amazon’s proposal to invest about $500 million to build out a food retail business.
An Amazon India spokeswoman confirmed that the company has received government approval to build out a supply chain for food retail.
“Yes, we have received the government approval for food retail... We are excited by the government’s continued efforts to encourage FDI (foreign direct investment) in India for a stronger food supply chain,” said the spokeswoman.
According to one of the executives mentioned above, Amazon can potentially control every aspect of the supply chain of the food business and not be dependent on third-party sellers on its marketplace once the approval comes through.
With the licence to retail food through its own subsidiary, Amazon will be in a position to gain a significant edge over archrival Flipkart, which is preparing to launch the grocery category over the next few weeks. The fact that Amazon is armed with deeper pockets gives it a significant edge over BigBasket, which currently is looking to raise at least $75 million in fresh funds. Over the past year, BigBasket has even held talks with Amazon India for a potential sale, although those talks have not materialised in a deal yet.