Ama­zon Seeks to Set Up Shop in In­dia’s Food Bazar

Co to open food-only out­lets along with an on­line plat­form to sell lo­cally pro­duced items

The Economic Times - - Front Page -

Ra­sul Bailay & Chaitali Chakravarty

New Delhi: In­dia could be the sec­ond coun­try to see Ama­zon brick-and-mor­tar stores, with the Seat­tle-based com­pany hav­ing sought the gov­ern­ment’s ap­proval to open food-only out­lets along with an on­line plat­form to sell these lo­cally pro­duced items.

The US gi­ant plans to un­der­take “re­tail trad­ing of food prod­ucts (pro­duced or man­u­fac­tured in In­dia) to cus­tomers at any lo­ca­tion through any chan­nel, off­line or on­line, in­clud­ing ecom­merce, across In­dia,” ac­cord­ing to a per­son who saw the ap­pli­ca­tion filed by Sin­ga­pore­based Ama­zon Cor­po­rate Hold­ing Pvt Ltd, which will hold 99% of the pro­posed en­tity with the rest owned by Ama­ Inc, Mau­ri­tius.

The sub­sidiary seeks to in­vest .₹ 3,500 crore over the next five years and sell third-party or its own pri­vate la­bels of lo­cally pro­duced and pack­aged food prod­ucts. Ama­zon’s first gro­cery store in the US will open to the pub­lic this year.

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

“What might work well is open­ing some con­cept stores to show­case some of the prod­ucts,” said Ab­hishek Mal­ho­tra, a part­ner at AT Kear­ney. “Open­ing some stores in se­lect lo­ca­tions, air­ports, high streets, malls to show­case the breadth of the of­fer­ing — that might be done. In this case, it gives the flex­i­bil­ity to do that.”

The US com­pany de­buted in phys­i­cal stores in Novem­ber 2015, when it opened the first Ama­zon book­store in Seat­tle, fol­lowed by out­lets in Port­land and San Diego. Ama­zon will roll out its ninth book­store in San Fran­cisco’s Bay Area later this year. Ama­zon, which posted a 27% in­crease in net sales to $136 bil­lion in 2016, is cur­rently pre­par­ing to open its first gro­cery in Seat­tle. The store, branded Ama­zon Go, uses tech­nol­ogy to of­fer cus­tomers a check­out-free ex­pe­ri­ence. “Ama­zon Go is a great model — you just walk through and as the fu­ture evolves and it be­comes more and more dig­i­tal, it gives them the flex­i­bil­ity to do both,” said Mal­ho­tra.

In­dia is a fo­cus area for Ama­zon, which is the first global big­wig to take ad­van­tage of a June leg­is­la­tion that carved out a food-only re­tail­ing seg­ment, al­low­ing 100% for­eign di­rect in­vest­ment for com­pa­nies sell­ing lo­cally sourced and pro­duced food items. Such ven­tures can sell through both brick-and-mor­tar stores and their on­line por­tals.

Most other global re­tail­ers, in­clud­ing Wal­mart Stores Inc, have cold­shoul­dered In­dia’s am­bi­tious lib­er­al­i­sa­tion move aimed at cre­at­ing mil­lions of jobs and help­ing farm­ers. Wal­mart is said to have told In­dian gov­ern­ment of­fi­cials that deal­ing only in wafer-thin mar­gin food articles does not make busi­ness sense and non­food items should be in­cluded.


Ama­zon’s ap­pli­ca­tion has come as a re­lief for the gov­ern­ment whose high­deci­bel cam­paign to at­tract global re- tail­ers and man­u­fac­tur­ers was oth­er­wise seen as flop­ping. Last year, top gov­ern­ment of­fi­cials in­vited rep­re­sen­ta­tives from Wal­mart, Nes­tle, Heinz and Thai­land’s CP Foods to gen­er­ate in­vest­ments un­der the new cat­e­gory.

Min­is­ter for Food Pro­cess­ing Har­sim­rat Kaur Badal, a pro­po­nent of FDI in food re­tail­ing, led a team of of­fi­cials to Lon­don and met rep­re­sen­ta­tives of Bri­tish com­pa­nies in­clud­ing Tesco, Sains­bury’s, Harrods, Marks & Spencer and Co­bra Beer to drum up sup­port for the pol­icy with­out any luck.

It was only late last year that some pos­i­tive re­sponses started, with ap­pli­ca­tions from hy­per-lo­cal gro­cery de­liv­ery com­pa­nies BigBas­ket and Gro­fers. Ama­zon has told the Depart­ment of In­dus­trial Pol­icy and Pro­mo­tion that it plans to de­velop in­fra­struc­ture, in­clud­ing ware­houses and dis­tri­bu­tion fa­cil­i­ties such as a tem­per­a­ture-con­trolled sup­ply chain to un­der­take farm-to-fork re­tail­ing of food items, ac­cord­ing to the per­son fa­mil­iar with its ap­pli­ca­tion.

The DIPP for­mu­lates FDI pol­icy in In­dia and ap­proves and fa­cil­i­tates in­vest­ments. Ama­zon said the pro­posed ven­ture could help yield bet­ter re­turns for farm­ers by re­duc­ing waste and cut­ting le­gions of in­ter­me­di­aries gen­er­ally in­volved in the food sup­ply chain.

Ama­zon cur­rently op­er­ates an on­line mar­ket­place in In­dia. Op­er­a­tors of such busi­nesses can only of­fer their plat­forms to other In­dian-owned en­ti­ties to sell prod­ucts and can­not them­selves be in­volved in re­tail­ing. Lo­cal ri­vals Flip­kart, the coun­try’s largest ecom­merce com­pany, and Snapdeal also op­er­ate such plat­forms.


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