Flipkart, the Walmart-owned Indian ecommerce company, has registered a new company called Flipkart Farmermart Private Ltd in India, to deepen its penetration in food retail to fight Amazon, and run a farm-to-fork operation, sources told Moneycontrol.

Through Flipkart Farmermart, the ecommerce company will operate a full-fledged food retail business, including having its own private label, owning the grocery supply chain and even open stores.

“There is a lot more that Flipkart can do in food,” said one of the sources. “The company has got the nod to invest Rs 2,500 crore from the Flipkart board to expand its operations in the grocery business.”

Flipkart is late to the party

Amazon secured a food retail licence in July 2017, and since, has been investing to build the grocery business. Flipkart will now apply for the licence, and then will have to take 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,” said the second source. “Grocery is the stickiest business that any ecommerce company can build. There is a huge repeat factor, which is not there with electronics or fashion or furniture.”

Flipkart hopes to bring in Walmart’s expertise in building the supply chain for food. 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 being a subsidiary company. For the first time it also allows Walmart to bring in its grocery business understanding and wherewithal to a consumer business,” said the first source.

The source also said that 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 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 period, to reach to Rs 1,03,413 crore by 2023, from Rs 6,201 crore in 2018.

Questions sent to Flipkart did not elicit any reply when this story was published. We will update it when we receive a response.

First Published:Oct 15, 2019 10:13 AM IST