Amazon delays rollout of online food retail venture

INDIA – Amazon’s online food retail venture, which was expected to start during Diwali, is getting delayed as the company needs to keep this separate from its marketplace, which functions as a platform to connect sellers with buyers, said people with knowledge of the matter. Food is the only segment where it’s allowed to sell directly to consumers.

The Seattle-based firm is the first global company to seek and get government nod to sell food made and packaged in India directly to consumers.

India allowed 100% foreign ownership in food retail last year to promote local farm produce.

Amazon and other foreign retailers are not allowed to sell any nonfood items directly to consumers.

The government has asked Amazon to keep the food and the marketplace businesses at arm’s length from each other with separate offices, inventories and accounting systems.

An Amazon India spokesperson declined to comment.

“We have not announced any dates or details about our approval for food retail licence and we cannot comment on future plans,” said the spokesperson.

Amazon plans to invest $500 million in India over five years to sell third-party and its own private-label food articles, sourced and packaged locally.

The warehouses that Amazon uses are leased to Amazon Seller Services Pvt., some of which need to be moved to Amazon Retail India Pvt. as part of the segregation.

In some cases, lease agreements will have to be signed with both entities, said one of the persons cited above.

The company will also have to get Food Safety and Standards Authority of India (FSSAI) licensing, the person added.

The move is being keenly watched as it’s expected to trigger a price war with organised brick and-mortar retailers and online grocery companies, given the US company’s aggressive strategy.

It currently offers food products in some Indian cities through Amazon Pantry from third-party sellers. It also offers same-day grocery delivery on its Amazon Now app through a tie-up with retailers such as Big Bazaar and Hypercity in some cities.

Amazon debuted its first private grocery label in the US last year with products including coffee and baby food. Private label items are sold exclusively through Prime membership in the US and are priced lower than other popular brands.

As it expands the grocery business in its home country, it will also open offline Amazon Go stores that will offer customers a checkout-free experience through technology.

The timing of the opening will be determined by Amazon’s ambition, said Devangshu Dutta, chief executive of retail consultant Third Eyesight.

“It depends on what scale the company is planning to launch at,” he said. “If it is a big-bang launch, then the vendor base has to be ready because the backend is already there as Amazon runs Pantry, assuming they don’t get into perishable categories.”

ET Retail

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.