Amazon to shut its food retail business as e-commerce websites to lose revenue

Indian e-commerce market flourishing

Amazon India entered the food retail business in the year 2016. It ventured into the business seeking the stake in the rise of that market. Food retail segment in India was not at all exploited until Amazon India entered the market. As soon as Amazon entered, Flipkart started working towards it as well. Amazon had started out this business in metro cities only and was planning to enter other cities before foreign direct investment (FDI) guidelines took a sharp turn.

The newest FDI guidelines are very harsh for the e-commerce companies. It will be very hard for them to go around those and still function, all the guidelines need to be followed and there is no otherwise. That said, Amazon is already finding it hard and there is still a month to go for those policies to take effect. Amazon’s food retail business will be shut down if, from February 1, the new policies take effect. This is because the new policy does not allow the e-commerce players to sell products which come from their partners or affiliates.

The foods which are on sale on will vanish from the website from February 1 in order to follow the new FDI policies. Amazon had recently invested $500 million in its food-retail venture after India accepted a 100% FDI for agricultural products in order to help farmers and create jobs. These products which were locally produced were allowed to sell. Apart from this, Amazon and Flipkart have their own storage centers and logistics now those are also not going to be exclusive to their partners. E-commerce players will now have to give the same treatment to all the sellers while providing logistics support.

Amazon has also stopped the acquisition of a stake in Future Retail. This is only because of the new FDI policy and nothing else. They will look to buy the stock in the same company after they wrap their heads around this new policy.

According to Crisil, online retailers are also going to find it hard in the Financial Year 2020. The etailers are going to lose around INR 30,000 to INR 40,000 crore in revenues in the next financial year. It is going to be a hard time for them. That said the brick and mortar shops will grow largely and this will create a balance between the online and offline world. The offline retailers are going to see a surge in their market of about INR 10,000-12,000 crore.

The losses of the etailers will mostly be on the electronics side according to Crisil. The apparel segment will also be amongst the losses. The offline retailers, on the other hand, will see a rise in the fashion market mainly and also in the electronics market and this balance is what the offline retailers were crying for from a long time.

-Unmesh Phule

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