Amazon’s subsidiary will directly compete with online grocers BigBasket and Grofers.
Eight months after ecommerce major Amazon received government approval to invest $500 million food retailing in India, it is now gearing up to sell locally made food items through a wholly-owned subsidiary from March in India, according to a report in Economic Times.
Amazon’s subsidiary, which will directly compete with BigBasket and Grofers will also sell locally produced and packaged foods.
The ecommerce major told ET that it is on track to launch its food retailing business.
In July, Amazon got FDA approval to invest $500 million over the next five years in India to sell food that is sourced, produced and packaged locally under its own private label. It plans on selling these items both online and through physical stores.
India created a food-retailing sector to allow foreign companies to set up 100% owned subsidiaries to sell food that is sourced and produced locally. ET reports that Food is the only segment where it’s allowed to sell directly to consumers.
Currently, online grocery players BigBasket and Grofers also received government approval to sell locally produced food products. While being Indian players, these are al funded by foreign companies. Companies such as BigBasket already sells food items under its private labels.
Amazon currently runs an online marketplace in India, which means that it cannot sell directly to consumers. It is only a platform for sellers to sell their items.
The government is also considering allowing food retailer to sell personal care items, limited to 25% of their total sales.
ET reports that the government wants Amazon to keep its food-only retailing away from its marketplace business and maintain separate boards, staff, bank accounts and inventories. In fact, this requirement caused a delay in launching the food retailing venture, which was originally slated to be launched during Diwali.
Amazon will also have to move some of its Amazon Seller Services warehouses to Amazon Retail India and even get Food Safety and Standards Authority of India licensing.
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