Flipkart to start selling food through FarmerMart
In India, consumers spend about $500 bn on groceries annually. FarmerMart, with an authorised equity capital of Rs 1,845 crore, will sell items produced locally. Sales will initially be online, although the company can also sell through physical s...
Newly registered Flipkart FarmerMart, with an authorised equity capital of Rs 1,845 crore, will sell items produced locally. Sales will initially be online, although the company can also sell through physical stores.
“In line with the government of India’s FDI (foreign direct investment) policy, which allows 100% FDI in food retail for food produced and manufactured in India, Flipkart is applying for appropriate licences from the government,” said Flipkart Group CEO Kalyan Krishnamurthy. “We have secured all internal approvals for the same already.”
The entity will focus on food retail and help boost agriculture as well as the food-processing industry in the country, he said.
“We are looking forward to invest deeply in local agri ecosystem, supply chain and working with lakhs of small farmers, Farmer Producers Organisations (FPOs), food processing industry in India, helping multiply farmers’ income and bring affordable, quality food for millions of customers across the country,” he said.
In India, Walmart doesn’t sell directly to consumers and is an organised wholesaler or cash-and-carry operator that sells merchandise to small neighbourhood stores, hotels and catering firms. The world’s largest retailer acquired Flipkart for $16 billion in 2017 to gain access to India’s $670-billion retail market.
Food is the only segment in which etailers are allowed to sell directly to consumers. The government sidestepped opposition to foreign investment in multibrand retail in 2016 to create a food-retailing segment that it said was aimed at creating jobs and helping farmers. However, the government has asked ecommerce firms to keep food-only retailing ventures at arm’s length from flagship marketplaces by maintaining separate boards, staff, bank accounts and inventories.
“It will give impetus to sourcing from farmers directly and supporting food processing industry. It will boost farmers’ incomes and create jobs,” food processing industries minister Harsimrat Kaur Badal told ET. “This is what the ministry is aspiring to contribute to achieve doubling farmers’ income and job generation for our youth.”
She said Flipkart hadn’t yet applied to the Department for Promotion of Industry and Internal Trade. The newly created entity received Flipkart board approval to go ahead with its application last month, said top executives at the company.
“This shows Walmart’s seriousness in India and the intent is clearly to be a sizable retailer. Within retail, food is a large chunk and building scale will be paramount but building the supply chain will be daunting,” said Devangshu Dutta, chief executive at consultancy Third Eyesight. “Since gross margins are thin in this business, especially fresh produce, managing transportation, logistics and wastage will be crucial.”
Just 0.2% of India’s grocery market is online but participants are growing nearly 50% annually in a category that has been the monopoly of neighbourhood stores.
Walmart rival Amazon already has committed to invest $500 million over five years to sell third-party and own private label food products, sourced and packaged locally, both online and through brick-and-mortar stores. A few months ago, it launched two-hour delivery for fresh products and vegetables. Online grocers such as Grofers and Bigbasket have a dominant share of the online market, but Amazon, Flipkart and Swiggy are making inroads. With the highest frequency across categories and potential for private labels, online grocery can grow to $99 billion over the next decade from less than $1 billion, according to a CLSA report.