Flipkart to enter the food retail space in India with Farmermart

by aditi verma 2019-10-16 11:09:47

The Walmart-owned Indian e-commerce major company, Flipkart has successfully registered a new company under it, known as Flipkart Farmermart Pvt in India so as to deepen its brand in the food retail business in India, get ahead of Amazon, and run a typical farm-to-fork operation, as per the sources.

Through Flipkart Farmermart, The e-commerce major will be operating a full-fledged food retail business through the Flipkart farmermart. The company's business will include its own private label, a grocery supply chain as well as the open stores.

“There is a lot more than the e-commerce major Flipkart can do in the food retail space. The board has consented to invest around Rs 2,500 crore so as to expand its operations in the grocery business too,” as per the sources.

Flipkart is late to enter the Food retail business as its competitor Amazon has already secured a food retail license in the month of July 2017 and since then it has been consistently investing to build its grocery business. Flipkart will soon be applying for a food retail license and then it will have to get a go-head from the Department of Industrial Policy and Promotion (DIPP) for the required permissions to invest in food retail space.

“It is going to be critical for Flipkart to get this market. Grocery is the stickiest business that an e-commerce brand can ever build. There is a huge repeat factor, which is not present there with the electronics or the fashion or furniture,” as per another source.

Flipkart is hopefully relying on Walmart’s expertise in building its retail food supply chain. Walmart, the American retailer already runs a cash-and-carry (or wholesale) business that sells its merchandise to the small neighborhood stores, hotels and catering companies and has enough tie-ups with the Indian farmers for the supply of grocery and food produce. “That will be a huge help for Flipkart, as it is only a subsidiary company. It will also allow Walmart to bring in its understanding and wherewithal of the grocery business to consumer business,” as per the sources.

As per the sources, "It will be too early to say if Flipkart will be opening up the stores or will it just stick to an online-based selling model, but there might be possibilities that it will be opening up stores in the major cities of India in the coming time. That gives a lot of mindshare to a company, especially in food and grocery."

The online-based grocery stores in India are just starting to open up. According to a research firm, only about 0.15 percent (or two million out of 1.35 billion) Indians currently purchase products through the online stores. Although, the online grocery market is expected to expand at a compound annual growth rate (CAGR) of 68.66 percent between the years 2018 and 2023 to reach over Rs 1 lakh crore.

Flipkart sold its majority stake to American Company Walmart for $16billion last year. The extended business will be representing “an important portion of our efforts to boost Indian agriculture economy along with the food processing industry of India,” Mr. Kalyan Krishnamurthy, CEO of the Flipkart Group said in a statement. He added that Flipkart is already working with hundreds of thousands of small farmers for this business.

In a regulatory filing held this week, Flipkart had revealed that it is going to invest $258 million in this new venture. The company has secured the approvals from the board of the company so as to enter the food retail business in India, Krishnamurthy added.

“We’re looking forward to investing more in the local agri-ecosystem, supply chain and working with lakhs of small farmers, Farmer Producers Organisations (FPOs), food processing industry in the country, helping double the farmers’ income and bring affordable, quality food for millions of customers across India,” the chief executive of Flipkart added.

There are many online grocery stores such as Grofers, Big Basket etc, that currently dominate the online market. But other e-commerce majors like Flipkart, Amazon, and Swiggy are also making their way into this business. As per a source, Gross margins are thin in the food retail space especially in the area of selling fresh produce. Hence it will be crucial to manage the various costs such as transportation management, logistics as well as wastage.

Questions that were sent to Flipkart did not get any replies when this story was published.

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image source-TechGenyz