The Government of India has asked the ecommerce major Amazon to keep its food-only retailing business separate from the existing flagship marketplace business since the foreign firms are not allowed to sell products to consumers directly. The directions came alongside the GOI’s approval for Amazon India’s $500 million food retail investment plan. Other riders issued by the government includes separate boards, staff, bank account and inventories.
During February, Amazon had filed an application with the Department of Industrial Policy & Promotion (DIPP) to enter the food retailing sector in India. The country allows 100 % foreign investment (FDI) in food-only retailing, and such a venture is permitted to sell locally-made food products through online channels as well as brick-and-mortar stores. With the license to retail food from its own subsidiary, Amazon will be able to gain significant competitive advantage over Flipkart and BigBasket. While Flipkart is preparing to launch a grocery category in near future, BigBasket is currently looking for capital infusion with plans to even merge with small rivals to gain competitive advantage over cash-rich entract such as Amazon.