Amazon India launched the Amazon Now service for hyperlocal delivery in a few select cities in India last year. It was competing against the likes of BigBasket and Grofers, who have a strong hold in India right now.
However, the one thing different in these services is that Amazon cannot sell products of its own online. It has to source those products from a grocery store and supply it to the customers. With the 100% FDI in e-commerce retail last year, this situation is about to change.
Amazon’s Indian subsidiary has filed an application with the Department of Industrial Policy and Promotion(DIPP) that will help it obtain the license to set up a retail chain in India. It will allow the company to stock up and sell locally produced food products directly from farmers.
Speaking on this, an Amazon spokesperson said, “We are excited by the government’s continued efforts to encourage FDI in India for a stronger food supply chain. We have sought an approval to invest and partner with the government in achieving this vision.”
Walmart, another large retailer in the west, has been unable to enter India for whatever reasons, despite the Government’s relaxation in FDI rules. Amazon is also going to invest $500 million in this business over the next 5 years to set up a large retail chain in India.
How is this going to be favorable for everyone?
The Government’s decision to allow 100% FDI in retailing of processed foods was based on the assumption that farmers will be able to benefit directly, instead of selling their produce to other companies that sell processed food in India.
Right now, raw material is taken from the farmer, processed in factories and then sold through Amazon, which is a chain that the Government wants to break. It wants to allow Amazon, and the likes, to directly purchase farm produce from the farmers, stock it in its own warehouse and sell directly to consumers.
This way, the farmers get better value for money, Amazon can set up a huge business in India, Government is promoting local production and the consumer is getting more options to choose from. Amazon being a leading tech giant, has a good name in India, and with the investment coming in, the company seems to be very serious about the business.
In the past, the Government has tried to invite large international players like Walmart, Target and even Nestle to set up their own stores in India, but the idea has been largely unsuccessful because of the limitation to just processed food items and thin margins.
Source: ET
Good news!