Amazon Seeks Fresh Investment in India With New Grocery Service
March 09 2017 - 3:22AM
Dow Jones News
By Rajesh Roy and Newley Purnell
NEW DELHI-- 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.
Write to Rajesh Roy at rajesh.roy@wsj.com and Newley Purnell at
newley.purnell @wsj.com
(END) Dow Jones Newswires
March 09, 2017 03:07 ET (08:07 GMT)
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