Amazon India said on Monday it has received the government’s approval to invest $500 million in the country’s online food retailing market. The e-commerce player’s application to invest $ 500 million in retailing food products in India had been awaiting a clearance from the Department of Industrial Policy and Promotion (DIPP). The company had applied for permission to operate both in the online and offline spaces. The ability to sell food products online will give Amazon an edge over its e-retailing rivals in a market to which it has committed $five billion.
India’s grocery market is estimated at an annual $310 billion (Rs 20 lakh crore) of which organised retailers — online and offline — together access barely 5%. The opportunity for organised grocery retailers is pegged at around $62 billion(Rs 4 lakh crore). The grocery market accounts for around 48% of India’s total retail consumption. In 2015, Amazon had launched an online service — Kirana Now — aimed at delivering goods in a very short time using its own logistics, staff from neighbourhood stores or any of its logistics partners. The company had said at the time it wanted to enable customers to buy anything and everything online, anytime and anywhere at low prices.
Following the approval received for food retailing Amazon is expected to up a wholly-owned subsidiary in India to stock food products and sell online, sources explained.
Reports in the media suggest Amazon has been eyeing Bigbasket, a dominant online grocery player which sells in 25 cities. Based in Bengaluru, Bigbasket is targeting revenues of $one billion by 2020, according to analysts, who add it is a vertically integrated player with control over sourcing and customer experience. Even ahead of the permission to operate in the food retailing segment, analysts had predicted Amazon India was in a position to generate close to $80 billion in gross merchandise value (GMV) by 2025.
The government permits 100 per cent foreign direct investment (FDI) in the food processing sector. As per norms, a foreign company can 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.