Amazon eyes expansion of food retail business in India

Amazon eyes expansion of food retail business in India
Photo Credit: Photo Credit: Pixabay
25 Apr, 2019

After overcoming regulatory hurdles, US-headquartered retail giant Amazon is aggressively expanding its food retail business in India.

Amazon Retail India Pvt. Ltd (ARIPL) plans to take its operations to 60 more smaller cities in the country over the next year or so, according to a report in The Economic Times. ARIPL is currently present in 100 cities that fall under the Tier-II and Tier-III categories.

According to several media reports, parent company Inc made a fresh investment of Rs 240 crore in ARIPL last month to fuel this expansion.

Amazon’s food retail business works on a hub-and-spoke supply chain model where large warehouses provide products to smaller delivery centres established locally. Amazon is in the process of setting up dozens of such small delivery centres of about 2,000 sq. ft in the smaller cities, the report added. These smaller centres will be used to store and supply products in the fast-moving consumer goods (FMCG) category.

ARIPL, which began operations in the second half of last year, currently sells about 3,000 stock-keeping units of food products with a supplier network of 250 vendors across 100 cities.

An email query sent to Amazon India seeking further details about its food retail business did not elicit a response till the time of publishing this report.

Amazon had secured the Indian government’s nod to invest $500 million in the food retail sector in 2017 after the Centre had, in 2016, allowed 100% foreign direct investment (FDI) in food processing and trading, including through e-commerce, for products manufactured in India. ARIPL was gradually converted into a grocery supplier on its marketplace,

However, ARIPL’s operations were delayed for over a year even after the initial approval as the central government directed the retail giant to operate its marketplace and the food-only venture separately with separate equipment, machinery and warehouses.

Though it restarted operations, the business was further hit by a fresh regulatory hurdle when the Department for Promotion of Industry and Internal Trade (DPIIT) released the Press Note 2 guidelines late last year, barring marketplaces from selling products through companies in which they own stakes.

This move essentially disallowed Amazon’s e-commerce arm from selling products from the company’s food retail business. It received a breather later when the government clarified that FDI in sectors including food retail were exempt from the modified FDI guidelines for online marketplaces.