Amazon pumps Rs 238 crore into Indian food retail arm
Food and grocery is set to rule the second wave of Indian ecommerce. The potential is huge given that BigBasket, Grofers, Amazon, and Flipkart together comprise less than 6 percent of the online food retail pie.
Amazon has put in Rs 238 crore into Amazon Retail India Private Limited, according to filings available with the RoC. The money has come from Amazon's company in Singapore, Amazon Corporate Holdings. The investment shows that Amazon is keen to enter the food space in India with ARIPL, which sells groceries and home supplies.
A recent DIPP circular, stating that ecommerce companies founded by foreign firms could not hold stake in distribution companies and source more than 25 percent of products from one distributor, sent the entire ecommerce industry into a tizzy. The circular required ecommerce companies to restructure operations. Everyone wondered how this would impact Amazon Pantry, which was sourcing products from Future Group and More to deliver to customers in under two hours.
With this fresh infusion, Amazon Retail is poised to take on Grofers and BigBasket, two of the leading players in the food and grocery segment. Grofers recently raised $60 million from Softbank while BigBasket raised $150 million from Alibaba.
The battle for food and grocery
Food and grocery is set to lead the second wave of Indian ecommerce in this decade. The first wave was between 2007 and 2017 when Flipkart dominated the Indian ecommerce industry for several years before Amazon began competing neck to neck over the last three years. However, both the companies were just experimenting with food and focused heavily on books, apparel and electronics.
But, the fight for the Indian palate has just begun. Will Grofers and BigBasket beat Amazon and Flipkart? The market is big enough for everyone because food is a $350 billion dollar market, according to E&Y; only about $20 billion of this market is organised. When it comes to the processed foods industry and food exports from India, the industry size is expected to be $895 billion by 2020 or 2022, according to IBEF.
This infusion of Rs 238 crore by Amazon may seem like an insignificant amount when compared to what Grofers and BigBasket have invested so far. Nevertheless, it means that Amazon means business and will ride on its current network to build its food and grocery arm. And with better deals, the consumer will continue to be king.