The food retailing market in India is set to hot up with Amazon planning its national debut into online food retailing during the Diwali season. According to a report in the Economic Times, Amazon will make its food retailing entry through its subsidiary Amazon Retail India and eventually will launch a private grocery label like it did in the US.
Amazon recently received government approval for FDI in food retailing. This is essentially govt’s nod for stocking and selling food and grocery in India, both online and through physical stores.
ET reports that Amazon plans to invest $500 million in this segment over the next five years. And apart from its own private label, it also has plans of selling locally produced and packaged foods products from third parties.
It currently offers grocery delivery in a few cities through Amazon Now for which it has tied up with retailers such as Big Bazaar and Hypercity. It also offers food products in some cities through Amazon Pantry. But this is from third-party sellers.
Now with its FDI licence, Amazon will sell directly to consumers.
After Amazon forayed into grocery, last year it launched its first private grocery label in the US which are exclusively available to Prime members. This label sells products like coffee and baby food. It is also working on opening offline Amazon Go stores that will let its customers checkout without queues with the use of technology.
While the government is reportedly keen that Amazon opens physical stores in India, the company as not made any such plans.
ET reports that the move is being keenly watched as it’s expected to trigger a price war with organised brick and-mortar retailers such as Big Bazaar and online grocery companies, given Amazon’s aggressive pricing strategy.
Analysts say that a physical store for amazon is just a matter of time. A multi-product, multi-brand company has to be present in multi-format says one expert.
However, a grocery and food retailer told ET that it will be difficult for multinationals to make money in food retail in India because of humongous costs associated with compliance standards.
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