Amazon has been granted the license to sell locally made food items. India granted 100 % FDI into the food retailing in 2016. The move was to help farmers and local businesses. Allowing FDI will bring more jobs and growth in the earnings of the farmers as envisioned by the policymakers.
The current competitor in the food retailing sector is Big Basket and Grofers, who have a considerable market share in India. While Grofers sale mostly grocery items including food and vegetables, big basket mainly focuses on the food and vegetables. Both the companies are foreign-funded yet they operate on a smooth scale in India. While Walmart did not wish to be involved in the market citing that market is not viable as it wishes to sell non-food items too.
It has invested 500 million $ into this food space which will be 100 $ subsidiary of Amazon Retail India. Currently, it operates an online marketplace in India, as it is believed that this investment will further push amazon’s position in the startup market.
The big investment made also depict the confidence in the Indian market as the consumption increases in India. With a deep pocket of the company, this amount may sound small, but it is enough to send right signals to the competitors in the food retailing sector that it is ready for the battle. As it did in the e-commerce space since last few years battling a tough fight with Amazon and Snapdeal.
Though the government has given the license, it has asked the company to keep both of its businesses in Indian separate. Amazon seller service private and Amazon retail India private should be treated as two different business having a different board of directors and staffs. Media reports that Govt. may allow food retail ventures to sell non-food items limited to 25% of their Total online sales.
The Food Retail Market and FDI
India is one of the largest food producers in the world yet the people producing it are always the sufferers. To improve their condition in the technologically advancing times, the government allowed the 100% FDI subject to locally produced and locally package food. It was a decision which was taken in the best interest of the farmers.
The foreign companies had to invest in the local industry to generate their business and Profit. But, many top retailers have shied away from investing in such a kind of scenario. There were reports in media that earlier Amazon was looking to buy a few of the Food startups in India, such as big basket but that failed talk lead Amazon to apply for its separate food retail venture.
It is reported that Flipkart is also looking to open its grocery market soon but, with this move by Amazon, it seems they are far behind in the market. we will see how the market performs once Amazon enters the Food retail market, but we do hope to see tough competition as we see in today’s e-commerce space in India.