Will Amazon’s Entry Disrupt the Food Retail Market in India

Expanding it’s business in India, Amazon recently secured an approval to stock and sell food and groceries in India. The online retail giant is in a pitched battle with home-grown rival Flipkart and the approval to sell food products is expected to disrupt the food retail market in India.

According to media reports, Amazon is planning to invest $500m (approximately Rs 3,370 crore) in the food segment. The e-commerce company has already committed to invest over $5bn (approximately Rs 32,263 crore) in India. The company will open ‘wholly-owned’ subsidiaries in India that will stock and sell food products online.

Grocery Market in India

While the online shopping for gadgets and clothing has penetrated the tier two and tier three cities, the grocery market in India is still dominated by the brick-and-mortar stores. However, looking at the market trends and gauging the potential of a bigger market, e-commerce companies and food start-ups started making a move. The food retail market in India is currently worth Rs 25 lakh crore. It is expected to cross Rs 61 lakh crore by 2020.

As per the proposal, the company will open a wholly-owned subsidiary in India to carry out the business. It will stock food products and sell online. According to PTI dry food grocery that includes, cereals, grains, grams, pulses, sugar, edible oil and dry fruits constitutes 34.7 per cent while milk and dairy products account for 16 per cent of the food market. Spices at Rs 1,50,000 crore, fresh produce at Rs 3,90,000 crore and perishables like fish, poultry and sea food at Rs 2,00,000 crore are the other food categories other than the processed foods.

Online Grocery Startups

As Indians are welcoming the processed and western food options, the government wants to expand the market and business opportunities. At the India Food Forum 2016 in Mumbai, Minister for Statistics and Programme Implementation (Independent Charge) V K Singh, requested the entrepreneurs, “to move beyond the urban market and spread to the semi-urban and rural markets.”

Around 40 medium to large scaled startups are catering to online groceries and food products market in India. BigBasket, Grofers, ZopNow, NatureBasket to name a few have managed to penetrate metros and tire one cities. The biggest challenge facing the online grocery startups is last-mile logistics and procurement. They complicate the operations and each startup is tackling these challenges differently reported YourStory.

According to the news agency Reuters, Flipkart, also plans to move into the groceries space. In June this year Amazon announced its plans to take over organic food specialist  Whole Foods Market Inc for $13.7 billion (Rs 883.6 billion) in United States.

Regulating the Market

The rise in the number of food e-commerce companies and a surge in food products being sold online has meant that the sector needs some regulation. In June this year, Ministry of Consumer Affairs, issued a notification to bring ecommerce companies and online marketplaces under its purview. Under new rules, e-commerce companies will have to display online, the expiry dates, maximum retail prices and country of origin of the packaged consumer products