Flipkart, the Walmart-owned Indian e-commerce company, has registered a new company called Flipkart Farmermart Pvt in India to deepen its penetration in the food retail space, take on Amazon, and run a farm-to-fork operation, sources told Moneycontrol.
Through Flipkart Farmermart, the e-commerce company will operate a full-fledged food retail business, including its own private label, a grocery supply chain and even open stores.
“There is a lot more that Flipkart can do in food. The board has consented to invest Rs 2,500 crore to expand its operations in the grocery business,” a source said.
Flipkart is late to the party. Amazon secured a food retail licence in July 2017, and has since been investing to build its grocery business. Flipkart will now apply for a licence, and then will have to get a go-head from the Department of Industrial Policy and Promotion (DIPP) to invest in food retail.
“It is critical for Flipkart to get this piece right. Grocery is the stickiest business that any e-commerce company can build. There is a huge repeat factor, which is not there with electronics or fashion or furniture,” a second source explained.
Flipkart hopes to bank on Walmart’s expertise in building its food supply chain. The American retailer already runs a cash-and-carry (or wholesale) business in India and has tie-ups with farmers for grocery and food produce. “That will be a big help for Flipkart, it being a subsidiary company. It will also allow Walmart to bring in its understanding and wherewithal of the grocery business to a consumer business,” the first source said.
It is too early to say if Flipkart will open up stores or stick to an online-only selling model, but “there are possibilities that it might open up stores in major cities in the coming years. That gives a lot of mindshare to a company, especially in food and grocery,” the source added.
The online grocery market in India is just opening up. According to research firm Research and Markets, only 0.15 percent (or two million out of 1.35 billion) Indians make purchases through online channels. However, the market is anticipated to expand at a compound annual growth rate (CAGR) of 68.66 percent between 2018 and 2023 to reach over Rs 1 lakh crore.