Amazon Retail ups ‘pantry’ play after clarity on FDI

Kolkata | New Delhi: Amazon has scaled up its wholly owned food retail business, Amazon Retail India, as the main seller of food and grocery products on the marketplace’s online supermarket, Amazon Pantry.

This follows the government having clarified that companies with foreign direct investment (FDI) in food retail can continue to sell through ecommerce, two senior industry executives said.

They will be out of the purview of curbs in the e-commerce FDI policy that came into effect on February 1, according to the clarification issued by the erstwhile Department of Industrial Policy and Promotion (DIPP) on January 3. “There is no change in the FDI policy on food product retail trading, which permits 100% FDI under approval route, including through e-commerce, in respect of food products manufactured and/or produced in India,” it had said.

 
It had further said that “Press Note 2/2018 is applicable only to entities which operate a marketplace for e-commerce.

FDI in other sectors continue to be governed by the specific provisions pertaining to them.” DIPP has since been renamed the Department for Promotion of Industry and Internal Trade (DPIIT).

Amazon Pantry resumed in markets such as Delhi-NCR and Mumbai on Tuesday with Amazon Retail India as the seller for staples like pulses, rice and atta, edible oil, biscuits, instant noodles, snacks and savouries.

These categories, along with non-food FMCG (fast-moving consumer goods), were earlier sold primarily by Cloudtail, which went off the marketplace from February 1as a seller since Amazon holds a 49% stake in it. Under the e-commerce FDI rules, marketplaces can’t have equity participation in sellers.

For non-food FMCG products, Amazon is now betting on preferred third-party sellers such as Sigma Online, which lists most of the products in personal care, health and hygiene, and laundry.

The executives said Amazon is planning to make Amazon Retail India the focussed seller for its hyperlocal platform Prime Now, where Cloudtail was the main seller.

ARIPL, with the specific approval for food retail, remains compliant to all relevant laws, said an Amazon India spokesperson.

Atul Pandey, partner at Khaitan & Co, said that Amazon Retail India is governed by FDI provisions for food retail, not those for e-commerce.

“FDI policy is very clear with respect to food retail with a clear provision which permits 100% FDI in food retail under approval route,” Pandey said.

“Since Amazon has approval from the government for online as well as brick-and-mortar food retail, it is very well within its rights to sell through Pantry and Amazon.in.

Even the clarification of press note 2 issued by DIPP mentions FDI in other sectors continue to be governed by specific provision of that sector.”

The move will mean Amazon Retail will be able to offer good deals and thus attract repeat customers, said an executive.

The development could hit small and medium sellers, said the All India Online Vendors’ Association, which has 3,500 members.

“Marketplaces squeeze small sellers by charging higher fees, charging for ads, threatening to shut down account and gives all these free to the large sellers,” a spokesperson said.

“Big or small, sellers on the platform should have level playing field with equal fees charged by the platform.”