The government has directed Amazon to keep its food-only retailing business separate from its existing flagship marketplace business, says a report in The Economic Times. This has been done as foreign firms are not allowed to sell products to consumers directly, added the report.
On Monday, the government cleared Amazon’s $500 million (Rs3,225 crore) food retailing proposal, but asked the company to maintain a separate management and offices for the new venture, said the newspaper, citing an unnamed source. The company got the approval only after several riders were issued by the government, which includes having separate boards, staff, bank account and inventories, added the report.
India allows 100 % foreign investment (FDI) in food-only retailing, and such a venture is permitted to sell locally-made food products through online channels as well as brick-and-mortar stores, said the report.
In February, Amazon had filed an application with the Department of Industrial Policy & Promotion (DIPP) to enter the food retailing sector in India.
The online marketplace wanted to undertake retail trading of food products to customers at any location through its offline and online channels, says a report in Theindianwire.com.
The government approval allows Amazon’s food retailing proposal to hold its own inventory and sell directly to consumers for the first time in India. Amazon’s food retailing subsidiary seeks to make the investment over the next five years and plans to sell third-party or its own private labels of locally produced and packaged food products, added the report.
With the licence to retail food through its own subsidiary, Amazon will be in a position to gain a significant edge over arch-rival Flipkart, which is preparing to launch the grocery category over the next few weeks. The fact that Amazon has deeper pockets gives it a significant edge over BigBasket, which is currently looking to raise at least $75 million in fresh funds.
Over the past year, BigBasket has even held talks with Amazon India for a potential sale, although those talks have not materialized in a deal yet, reported Mint.