Amazon targets national roll-out of Indian food e-commerce operation after pilot launch

26-Feb-2018 - Last updated on 26-Feb-2018 at 02:18 GMT

Amazon is the first foreign e-commerce player in India to sell food items to customers directly, online. ©GettyImages

Amazon India is set to roll-out its food retail business across the nation in the next quarter, having launched its pilot project in Pune city, Maharashtra state.

The initial Amazon Retail offering means the firm is the first foreign e-commerce player in India to sell food items to customers directly, online.

Amazon Retail sells locally-made and packaged foods through its e-commerce platform and competes with other locally-owned but internationally-backed online retailers such as Grofers, BigBasket and Supr Daily.

Last July, the Indian government granted Amazon permission to invest US$500m in a wholly-owned venture to sell locally-produced and packaged food products through online and offline channels.

Prior to that, in 2016 the government had opened its food-only retail segment to 100% foreign direct investment to increase jobs in the country, as well as to aid the business of local producers.

Just in early February, Amazon pumped in about Rs1,950 (about US$306m) into its India unit in a fourth capital injection to ready itself for the final push.

It will take at least another quarter before the food retail business goes nationwide.

Amazon is thought to be the only globally-owned firm to make the move into pure food e-commerce retailing, with other giants seemingly deterred by the fact the India government does not permit other items, such as personal and household goods, to be sold alongside food products.

E-commerce potential

The country’s food e-commerce sector is currently the focus of considerable investor attention, with Gurgaon-based online grocery start-up Grofers in talks to raise up to US$65m.

It has been reported that the latest funding round is led by existing investor SoftBank Group Corp, with participation from Tiger Global Management.

Grofers raised US$120m in the previous round, at a valuation of about US$400m in 2015.

The company’s evaluation is expected to significantly lowered, possibly by more than 40%.

Grofers has shut operations in several cities and restructured its business, instead focusing on India’s National Capital Region (NCR) as well as further investing in improving supply chain and technology.

Founded in 2013, it currently delivers around 15,000 orders daily. The company hopes that this latest funding will help it sustain its turnaround.

International attention

While Amazon has decided to enter the market alone, other global e-commerce outfits are investing in local players.

Just at the beginning of this month, the Alibaba Group led a US$300m investment into Bengaluru-based BigBasket, regarded as India’s biggest online grocery retailer with operations in 27 cities.

The Chinese e-commerce giant fronted a majority 75% of the latest capital injection, making it the biggest shareholder.

Hari Menon, co-founder and CEO of BigBasket, said the investment valued the company as US$950m.

He added that that India’s retail market is worth more than US$900b, and grocery shopping constitutes about US$600b from that amount.

Meanwhile, Walmart is in talks to buy a stake in Indian venture Flipkart.

According to market intelligence provider Kalagato, BigBasket held about 35% share in online grocery retail in India, followed by Grofers at 31.5% and Amazon at 31.2%, in March 2017.