Amazon India Gets Government Nod For Food Retail Investment

Amazon India will now venture into the food retail sector after receiving the government’s approval to invest $ 500 million in this sector. Amazon, as per the proposal, will be able to open a wholly owned subsidiary in India to stock food products and sell them online.

The Department of Industrial Policy and Promotion (DIPP) gave the consent to the ecommerce giant’s proposal, which had been pending before the Foreign Investment Promotion Board (FIPB). The FIPB was abolished in May to simplify procedures to seek clearance on FDI proposals.

The grocery market accounts for around 48% of India’s total retail consumption and is valued at $ 310 billion annually. Presently, Groffers and BigBasket are the key players in the online grocery space. All three companies have submitted proposals worth $ 695 million to the Indian Government for retail of food products.

At present, the government allows 100% foreign direct investment in the food processing sector. This regulation allows multinationals to set up wholly owned online and brick and mortar subsidiaries. This new Amazon business unit will sell either private or third party labels produced, processed or manufactured in the country.

In Seattle, USA, Amazon is set to launch their first brick and mortar grocery store Amazon Go which will neither have checkout lines nor cashiers. In this one of a kind grocery store, users will just have to scan their Amazon app when entering the store and shop as the company’s proprietary ‘Just Walk Out’ technology tracks users’ virtual carts. The payments will be automatically facilitated through the customer’s Amazon.com accounts.

It is not clear whether the Indian grocery store will also be developed along the same lines or will hold a different concept. The ecommerce giant has already invested close to $ 2 billion in India, since it started its operations in June 2013. They plan to further invest another $ 3 billion to compete against rival ecommerce giant Flipkart.