India's largest e-commerce platform Flipkart is planning to open brick-and-mortar grocery stores in India. The Walmart-controlled company is trying to tap the food retail industry in the country where 100 per cent FDI is allowed. This move to open grocery stores across the country comes after the company opened its 5th online grocery store in Mumbai
It may be noted that foreign investors are not allowed to open retail stores in the country. However, in the food retail business, a foreign investor is allowed to open physical stores. A ToI report cited sources privy to the matter saying, "Globally around 50-60% of Walmart's sales come from food. The strategy of opening offline stores falls into Walmart's overall scheme of things."
Walmart is known across the US for its food and grocery business but due to India's FDI laws, it is not allowed to operate business-to-consumer (B2C) stores in the country. It is only allowed to operate the business-to-business (B2B) wholesale segment. This move to enter food retail business is anticipated to boost the company's cash-and-carry business as well where the revenue has been a little slow.
Food accounts for about two-thirds of India's total retail market. Sources told the national daily that this move to open offline grocery store will allow Flipkart to benefit from Walmart's expertise in the food and grocery retail business.
Walmart's global competitor Amazon has also committed to investing about $500 million in the food retail business through its food retail arm Amazon Retail India. It has bought a large stake in Aditya Birla Group's food and grocery retail chain and is also in the process of acquiring Kishore Biyani-led Future retail which operates Easy Day and Big Bazaar chain in the country.
Worth mentioning here is that Mukesh Ambani's Reliance Retail's upcoming entry into the online retail sector is the biggest challenge for both Amazon and Walmart-Flipkart. Reliance launched its food and grocery app among its employees in April this year to prepare for the commercial launch later in the year.
A recent Forrester report stated, "Due to the recent changes in eCommerce policy and the restrictions on an inventory-led model for marketplaces with FDI, Reliance Retail is finding a favourable policy environment to launch operations where it can use its existing retail infrastructure to deliver goods to customers".