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Amazon moves a step further in grocery segment, while Flipkart looks at M&A

E-commerce giant Amazon has got a nod from the Department of Industrial Policy and Promotion (DIPP) to stock and sell local grocery produce online reports Economic Times. The e-commerce company had filed an application in February to make an investment of $500 million for the online food retailing. Amazon is also testing the segment of online groceries in the US and Australia through AmazonFresh. It delivers both perishable and non-perishable items.

In India, Amazon currently has two services which deliver groceries in India, Amazon Pantry and Amazon Kirana Now:

  • Amazon Pantry is a service which delivers household items and grocery and is present in 14 cities in the country. Pantry ships goods in a box that can hold up to 3 cubic feet (or 15kg) of products and will charge users a delivery cost of Rs 20 per box ordered. It started operations in 14 cities in India, covering Delhi, Gurgaon, Faridabad, Noida, Ghaziabad, Kolkata, Mumbai, Pune, Hyderabad, Vijaywada, Guntur, Chennai, Bangalore and Mysore. We checked and many of the products in case of Pantry are being sold by Cloudtail India, which is a 51:49 joint venture company between Catamaran Ventures and Amazon Asia.
  • Kirana Now is a local grocery service launched in Bangalore in March last year, and is currently available in Bangalore, Delhi NCR, Mumbai and Hyderabad. It appears to have been renamed, and is being called “Amazon Now”. Pantry is a little different from Kirana Now, in that Amazon will deliver Pantry items in 24 hours as opposed to 2-4 hours for Kirana Now. It will also deliver household items as opposed to fruits/vegetables and other perishables delivered by Kirana Now. Amazon had partnered with stores like  Big Bazaar, Spar Hypermarket, HyperCity, Food World, The Baking Company and Local Supermarkets for this.

Foreign Direct Investment in multi-brand retail is not allowed in India, and Amazon currently operates as a marketplace. It’s worth noting that in its filing with the DIPP on FDI in B2C commerce (which eventually wasn’t allowed), Amazon had said that B2C Ecommerce “could” be restricted to non-perishable products. Groceries are perishable products.

Competition with Flipkart

Amazon’s is locked in battle with Flipkart to dominated e-commerce in India. But it looks like the Seattle-headquartered company is looking at businesses where Flipkart has either failed. Flipkart had started ‘nearby‘ for grocery supplies, but the company shut it down within six months of launch.  However, CEO Kalyan Krishnamurthy announced that it would re-enter the grocery segment. Krishnamurthy said the company was looking at mergers and acquisition to enter the market again.

Flipkart also tried to venture into content with Flyte music and e-books but wound those businesses up. Amazon launched Prime Video in India last year and is now looking t0 expand its content offerings in music as well.

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Competition with other players in India

Currently in India BigBasket and Grofers are the biggest players in the sector. BigBasket, which has raised a total of $235 million, posted losses of Rs 278 crore in FY16. BigBasket is operational in 25 cities and has its own range of organic products and dairy products. Meanwhile, Grofers raised $120 million in a round of funding from SoftBank, Russian entrepreneur Yuri Milner, with participation from existing investors Tiger Global and Sequoia Capital.

However, the online grocery delivery business had witnessed a major slowdown last year. PepperTap, which had raised $50 million, pivoted its business model to logistics. LocalBanya also shut its operations the same year.

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