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Amazon gets the go ahead for $500 million FDI in online food retail

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Amazon has received government of India’s approval to invest $500 million in the food retail segment, reports VCCircle. An Amazon spokesperson confirmed this to MediaNama. Earlier, in April this year, the Department of Industrial Policy and Promotion (DIPP) had approved Amazon’s plan to open a wholly-owned subsidiary to stock and sell local grocery produce online, following which the proposal was pending before the now abolished Foreign Investment Promotion Board.

The e-commerce major had filed an application in February to make an investment of $500 million in the online food retailing space. In India, Amazon currently has two services which deliver groceries, Amazon Pantry and Amazon KiranaNow:

  • Amazon Pantry is a service which delivers household items and grocery and is present in 34 cities in the country. It guarantees next day delivery and charges Rs 20 per box as delivery charges.
  • On the other hand, the grocery delivery service KiranaNow (Amazon Now), which was launched in Bengaluru last year, is currently available in Delhi-NCR, Mumbai, Bangalore and Hyderabad. Through KiranaNow, the company delivers perishable items ordered within two to four hours.

Foreign Direct Investment (FDI) 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 e-commerce “could” be restricted to non-perishable products. Groceries are perishable products. However, in an interview with ET, Amazon India MD Amit Agarwal had said that “I genuinely believe it (inventory-based e-commerce) is good as it would allow Amazon to source products from manufacturers that sellers are unable to because they have constrained working capital.”

Amazon’s continued focus on India

During the company’s Q1 2017 earnings call, CEO Jeff Bezos continued to be bullish on India and had also said that the India unit is the fastest growing marketplace and the company “will keep investing in technology and infrastructure while working hard to invent on behalf of our customers and small and medium businesses.”

In India, Amazon has been increasingly focusing on logistics off late:

  • Last month, Amazon India’s logistics arm Amazon Transportation Services (ATS) had received Rs 207 crore worth of funding, which was the second tranche of funds infused into ATS in less than a year, after the Rs 67 crore it had received in September 2016.
  • While in May this year, Amazon said it is doubling its storage capacity in the country by setting up seven new fulfilment centres by the end of the current quarter (Q2 2017), with a focus of larger appliances and furniture.
  • And last year, the company had opened six fulfilment centres in Chennai, Mumbai, Delhi and Jaipur to expand its services. At the time it had mentioned that 80% of sellers in India used its fulfilment services. In all, the company has increased its fulfilment capacity for sellers by 26% this year.

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