July 13, 2020


Connecting People

Flipkart to reapply for food retail licence – but why was its proposal rejected?

Flipkart’s Farmermart, the e-commerce outlet’s ambitious strategy to function a entire-fledged food items retail business, which include its have personal label, a grocery source chain and even open suppliers, has run into issues.

The Section for Marketing of Sector and Internal Trade (DPIIT) has rejected the e-tailer’s proposal to provide food items solutions as a result of on line and cell platforms.

Flipkart experienced planned to established up Flipkart Farmermart Pvt to deepen its penetration in the food items retail room, get on Amazon, and run a farm-to-fork operation.

Amazon, as it transpired, secured its food items retail licence in July 2017, and has because been investing to make its grocery business. In 2017 itself, a different on line grocer Grofers also received the nod to retail food items solutions in India.

Hits a Roadblock 

Flipkart experienced sought the government nod for Flipkart Farmermart in March this 12 months. In accordance to stories, Flipkart experienced received its have board acceptance to make investments Rs 2,five hundred crore to extend its operations in the grocery business.

But, at minimum for the time currently being, all the plans glimpse nixed.

Flipkart, though, has put out a usual corporate assertion.

“We are analyzing the department’s reaction and intend to re-implement as we glimpse to carry on earning a sizeable affect on little businesses and communities in India,” the corporation explained in its assertion. 

“At Flipkart, we think that engineering and innovation pushed market can incorporate sizeable worth to our country’s farmers and food items processing sector by bringing worth chain efficiency and transparency. This will further support boosting farmers’ cash flow and renovate Indian agriculture,” the assertion additional.

But why?

When Amazon is operating a comparable business, why is Flipkart’s proposal rejected? 

The government has not been seriously been specific in its reaction.

The Section for Marketing of Sector and Internal Trade (DPIIT), which falls less than the commerce ministry, has cited ‘regulatory issues’, which is also imprecise and gives place to a lot of speculation.

There is one particular idea that because Flipkart needed to integrate the food items retail device into its e-commerce system, which seems to be a violation of this government rule.

The policies mandate e-com marketplaces cannot keep inventory or have possession over goods marketed on their platforms. 

Such a rule is in place to guarantee that the e-commerce stores do not change into inventory-based mostly models and keep on being a system, where by 3rd-bash sellers instantly engage with buyers.

India has historically been wary of allowing for FDI in retail business for variuous causes, which include political with a lot of voices clamouring for supporting the nearby traders. 

It could be recalled that Amazon’s food items device, Amazon Retail India was granted authorization in 2019 to carry on promoting on its e-commerce system immediately after de-linking its warehouses and source chains. 

But the denial of licence to Flipkart ought to also worry Amazon, as there is place to think that the government is rethinking its special policies for food items retail.

Is the umpire a participant, also?

Also, this is where by issues get interesting if you variable in the progress that Jio Mart has been introduced in 200 towns throughout India previous week.

Jio Mart is in direct opposition to Amazon e-grocery business and also Flipkart’s planned Farmermart.

Jio Mart, of study course, have to have not contend with the FDI policies as it is a domestic participant.

Also, apparently and intriguingly, there is a different participant waiting around to enter the market: BharatEMarket.

This is a nationwide e-commerce market to be run by Confederation of All India Traders (CAIT) — in essence, a physique of Indian traders who have been crying hoarse over the arrival of international gamers in Indian retail.

As for each this report, this support, as a pilot system, is now obtainable in six towns — Prayagraj, Gorakhpur, Varanasi, Lucknow, Kanpur and Bengaluru.

Most importantly, this BharatEMarket is currently being introduced in collaboration with DPIIT, which of study course is the government physique that has now rejected Flipkart’s proposal.

Now, attract your have conlcusions.