Source: The Economic Times, Feb 16, 2017
NEW DELHI: India could be the second country to see Amazon brick-and-mortar stores, with the Seattle-based company having sought the government’s approval to open food-only outlets along with an online platform to sell these locally produced items.
The US giant plans to undertake “retail trading of food products (produced or manufactured in India) to customers at any location through any channel, offline or online, including e-commerce, across India,” according to a person who saw the application filed by Singapore-based Amazon Corporate Holding Pvt Ltd, which will hold 99 per cent of the proposed entity with the rest owned by Amazon.com Inc, Mauritius.
The subsidiary seeks to invest Rs 3,500 crore over the next five years and sell third-party or its own private labels of locally produced and packaged food products.
Amazon’s first grocery store in the US will open to the public this year.“We are excited by the government’s continued efforts to encourage FDI in India for a stronger food supply chain,” Amazon India said in a statement.
“We have sought an approval to invest and partner with the government in achieving this vision.” “What might work well is opening some concept stores to showcase some of the products,” said Abhishek Malhotra, a partner at AT Kearney.
“Opening some stores in select locations, airports, high streets, malls to showcase the breadth of the offering — that might be done. In this case, it gives the flexibility to do that.”
First global bigwig to show interest
The US company debuted in physical stores in November 2015, when it opened the first Amazon bookstore in Seattle, followed by outlets in Portland and San Diego.
Amazon will roll out its ninth bookstore in San Francisco’s Bay Area later this year. Amazon, which posted a 27 per cent increase in net sales to $136 billion in 2016, is currently preparing to open its first grocery in Seattle. The store, branded Amazon Go, uses technology to offer customers a checkout-free experience.
“Amazon Go is a great model — you just walk through and as the future evolves and it becomes more and more digital, it gives them the flexibility to do both,” said Malhotra.
India is a focus area for Amazon, which is the first global bigwig to take advantage of a June legislation that carved out a food-only retailing segment, allowing 100 per cent foreign direct investment for companies selling locally sourced and produced food items.
Such ventures can sell through both brick-and-mortar stores and their online portals. Most other global retailers, including Walmart Stores Inc, have cold-shouldered India’s ambitious liberalisation move aimed at creating millions of jobs and helping farmers.
Walmart is said to have told Indian government officials that dealing only in wafer thin margin food articles does not make business sense and non-food items should be included.
Relief for government
Amazon’s application has come as a relief for the government whose high-decibel campaign to attract global retailers and manufacturers was otherwise seen as flopping.
Last year, top government officials invited representatives from Walmart, Nestle, Heinz and Thailand’s CP Foods to generate investments under the new category.
Minister for Food Processing Harsimrat Kaur Badal, a proponent of FDI in food retailing, led a team of officials to London and met representatives of British companies including Tesco, Sainsbury’s, Harrods, Marks & Spencer and Cobra Beer to drum up support for the policy without any luck.
Amazon has told the Department of Industrial Policy and Promotion that it plans to develop infrastructure, including warehouses and distribution facilities such as a temperature-controlled supply chain to undertake farm-to-fork retailing of food items, according to the person familiar with its application.
The DIPP formulates FDI policy in India and approves and facilitates investments. Amazon said the proposed venture could help yield better returns for farmers by reducing waste and cutting legions of intermediaries generally involved in the food supply chain.
Amazon currently operates an online marketplace in India. Operators of such businesses can only offer their platforms to other Indian owned entities to sell products and cannot themselves be involved in retailing.