Amazon seeks fresh investment in India with new grocery service

Online retailer wants to sell groceries directly to consumers'

Amazon.com Inc. wants to stock and sell groceries online directly to consumers in India, two senior government officials said, the latest move in its quest to boost sales in the South Asian nation.
 
The e-commerce company has sought approval from India’s Trade Ministry to invest about $500 million in the new venture. The new Amazon grocery service would take advantage of recently eased restrictions on foreign retailers and deliver mostly local food products such as fruits, vegetables and other staples, according to one of the officials.
 
“We are excited by the government’s continued efforts to encourage FDI in India for a stronger food supply chain,” an Amazon spokeswoman said, referring to foreign direct investment. “We have sought an approval to invest and partner with the government in achieving this vision.”
 
The spokeswoman declined to comment on the amount to be invested or other details of the initiative.
 
Amazon, which dominates online shopping in the U.S. but has gained little traction in developing countries, is investing $5 billion in its logistics network and splashy advertisements in the world’s second-most-populous country. It has made rapid progress here since launching in 2013, with some analysts figuring its sales are within striking distance of its dominant homegrown rival, Flipkart Internet Pvt.
 
The push to sell food directly to consumers in India could resemble the firm’s Amazon Fresh, a subscription service in the U.S. and U.K. that provides quick food delivery for online orders. To protect the country’s many mom-and-pop shops, Indian law usually bars Amazon and other foreign retailers from selling directly to consumers.
 
To get around those restrictions, Amazon provides a service called Amazon Now, in which it works with local partners. Amazon teams park in front of local grocery stores in New Delhi and elsewhere.
 
They receive orders online, enter the outlets to pick the goods off the shelves and then deliver them by motorcycle.
 
Because of the restrictions, Amazon operates a pure marketplace in India, selling only goods offered through its website by third parties.
 
India is a promising market as online shopping becomes increasingly popular among its more than 1.2 billion people. Still, many consumers aren’t yet connected to the internet. Other challenges include poor infrastructure and low rates of credit-card use, which has prompted Amazon to accept cash payment when products are delivered.
 
“We’re bullish on India longer term, and it’s early, but we like the initial engagement we’re seeing” in its Prime program, Amazon Chief Financial Officer Brian Olsavsky said on an earnings call with analysts last month.
 
Amazon’s application comes after Prime Minister Narendra Modi’s government relaxed its foreign-investment policy last year, permitting foreign companies to have 100% stakes in food-retailing ventures in India, with the caveat that goods should be either grown or processed domestically.
 
Foreign retailers can’t sell imported food products or any other merchandise in such stores. International retailers have sought a review of the local-sourcing policy and want the government to permit at least limited sales of nonfood items such as household goods in the new stores or online platforms.
 
“We are discussing the retailers’ demand with government departments, and a final decision will be taken by the prime minister in due course,” Food Processing Minister Harsimrat Kaur Badal said.

Source: The Wall Street Journal