AMAZON INC. has obtained approval from Indian regulators to invest in local food businesses in a clear win for its effort to launch a grocery service in the South Asian country.
Now, the e-commerce giant will be able to stock, sell and deliver groceries in a country where it will be pitted against popular homegrown brand, Flipkart, as reported by Reuters. A source told the newswire Amazon will invest US$500 million in the segment, in addition to the US$5 billion it already planned to spend in India.
— Amazon.in (@amazonIN) July 4, 2017
Amazon will have a steep hill to climb though, as Flipkart still retains pole position as the most favored e-commerce site in India, though Amazon has steadily eroded its standing in the latest quarter of the year. According to Redseer consulting firm, the two companies have nearly equal brand trust among consumers. LiveMint reports Amazon’s Prime membership service is largely responsible for the success of Amazon, accounting for nearly 30 percent of all orders on Amazon India as of April.
Same-day grocery delivery services are a significant aspect of the Prime membership, and could endanger Flipkart’s standing in the region.
E-commerce has surged in India, thanks to the rise of the mobile shopper and Internet penetration in the country. Online shopping now accounts for a growing percentage of total sales in the country, and though only 34 percent of India is connected to the Internet, the rate of adoption is growing faster than in China or the United States. The advent of cheaper smartphones and steeper discounts have also helped.
That being said, Amazon will still need to overcome the stigma against shopping for food products online.
In India, cash is still king and independent brick-and-mortar stores account for most of India’s grocery sales. Amazon and Flipkart may be clawing market share in spaces such as garments and gadgets, but food is an entirely different question.
At the moment in India, Amazon sells groceries via Amazon Pantry, which only ships non-perishables and essentials through retailers such as Cloudtail. Amazon Now is yet another India service that provides same-day grocery delivery service in partnership with companies such as Big Bazaar, Star Bazaar and Hypercity.
It’s unclear what would happen to these partnerships with the onset of its new food venture.
Amazon has been moving aggressively into the grocery business as it tries to turn into the “everything store” for everyone. Last month, they bought over trendy US grocer Whole Foods for US$13.7 billion, and earlier this year, they unveiled Amazon Go, a brick-and-mortar store that has eschewed traditional checkout counters.