E-tailing giant Amazon may partner with local, neighbourhood food retailers to debut its online food retail business in India. The move will help the company focus better on customer service and delivery.
Union Food Processing minister Harsimart Kaur Badal on Wednesday indicated that Amazon is likely to get approval soon to start its online food retailing in the country.
Experts believe that Amazon's entry will revolutionise the online food retail segment that is currently dominated by BigBasket, Grofers and a couple of smaller players.
"There is tremendous potential in this market as it has been untapped so far. Indians spend somewhere between $350-360 billion every year on food. Even if Amazon is able to get one per cent of that, it will be huge", says Ankur Bisen, senior vice-president, retail and consumer products at Technopak, a retail consultancy firm.
Online food retailing market is only worth Rs 3,000 crore currently, but analysts say there is enough scope for it to double every year. Amazon is currently investing $500 million for food retailing. However, this amount will get ramped up as momentum picks up in the segment.
Some of the positives that will work in favour of Amazon are its expertise in technology, warehousing and brand, which it has built over the years. Online food retailing will also help Amazon position itself as a one-stop shop for all its consumption needs—from electronics and fashion to food and home and kitchen.
"They will also cash in on the popularity of Prime membership which has worked very well for them in India," says Harminder Sahni, Founder, Wazir Advisors.
However, food retailing has proved to be a complicated business in India. And Amazon too, will take its time to establish itself in the market. Organised food retailers, with a market presence close to 20 years, account for only five per cent of the total food retailing in the country, while majority still happens through mom-and-pop shops.
Plus, Amazon, like any other retailer, will have to battle supply chain issues and infrastructure in India. Online food retailing globally is struggling to find its feet and the global giant is one of the players experimenting in this space through various innovations in the US.
Some experts believe that the e-tailer might put up distribution centres in select locations in cities, catering to a particular area.
And with Amazon coming in, the space is abound with rumours of consolidations. While earlier, there were rumours about a possible BigBasket-Grofers merger, now it seems Amazon is looking to acquire BigBasket—the largest online food retailer in India—to establish its presence in the market.
