Amazon’s entry into Indian farm sector: Fruition will take time

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Guest Author: Shashikant Trivedi, Senior Journalist

10 September 2021, Indian: In the face of all odds of the Indian market, Seattle-headquartered American tech giant Amazon is exploring emerging potentially lucrative Indian market.

This is not because India recently issued new rules around foreign ownership of e-commerce companies operating in the country or attracted ire of many from various sections of Indian society over one of its prime video web series “Tandav” .

It is because India is a fast-growing economy. According to Forrester Research, India’s online market is expected to attain a worth of $85.3 billion by 2024. The country’s new e-commerce customer tribe offers the opportunity to generate millions for Amazon-like American tech companies that have lost millions in China due to tougher norms and stricter rules.

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In a bid to wring each available penny from the customer’s pocket, Amazon’s founder and Chief Executive Jeff Bezos is digging deep into consumers’ minds and pockets, collecting invaluable data from shoppers, readers and users. His planning is meticulous with a precise business strategy make it easier for him to decide which market and which sector to enter.

On the domestic front, a few months ago the company had a deal to buy Grocer’s Whole Foods Market. While in India, Amazon entered into a deal with Indian supermarket giant Future Group that owns Big Bazaar brand with – more than 1500 supermarkets, snack shops and fashion outlets across 400 cities in India.

Amazon put down $200 million two years ago to get first dibs to buy the retail assets of the Future Group, and it structured the deal to avoid the Indian government’s tightening on foreign involvement in local businesses. But that put Amazon in the way of Mukesh Ambani controlled Reliance Industries, one of the biggest and most powerful companies in India.

In August, Reliance brushed aside Amazon and struck a deal to buy all of the Future Group for $3.4 billion.

Amazon is now trying to stop the deal through arbitration proceedings in Singapore. The fight has spilled over into India’s courts, where Amazon has asked the Supreme Court to halt the deal until the Singapore arbitration is completed.

India’s Supreme Court recently ruled in favour of Amazon’s bid to block the multibillion-dollar deal and it rendered a fresh boost to company’s ambitious plans toward India’s nearly $900 billion retail market.

If translated in legal experts language, they said, the Supreme Court gave foreign businesses support for their ventures in India, where the government has limited foreign investment in a number of industries.

The court said an interim decision by an arbitrator in Singapore, which effectively put on hold a $3.4 billion sale of Future Group to Reliance Industries, was valid and enforceable in India.

The judgment, according to market experts, is one of its kind to win for any foreign businesses in a country that have found it difficult to do business in India.

However, Amazon still faces a government antitrust agency’s inquiry into the deal with a unit of Future Group. Recently, the Competition Commission of India issued a show-cause notice to Amazon, accusing the company of not being upfront about its interest in Future Retail when the agency signed off on the deal in 2019.

Buoyed up with the initial success after the Supreme Court decision, now Amazon is eyeing at Indian farm sector where it can decorate its stores with more greens and other farm products; if it successfully buys Future group’s Big Bazaar.

Amazon has begun offering real-time advice and information through a dedicated mobile app to help farmers and even deploy machine learning technology in agriculture.

If market sources are believed, Amazon is expecting to secure farm produce that yields two-thirds of the country’s $1 trillion in annual retail spending.

The program has a two-pronged strategy Reactive and Proactive Crop in which it promises to provide growers with cutting-edge technology and insights.

Amazon is the latest corporate giant hoping to tap the world’s largest annual harvest of fruit and vegetables after China’s joining Reliance Industries Ltd., Walmart Inc.’s Flipkart and the Tata Group, which recently acquired online grocer Bigbasket.

They aim to boost their businesses by helping modernize an industry dominated by small farmers by providing them basic equipment from temperature-controlled warehouses and refrigerated trucks. In turn, they will ensure a steady stream of fruit, vegetables and other groceries. And that holds the key to Indian online commerce.

Unless Amazon cracks the farm supply chain, it cannot unlock big growth in e-commerce. Gaining goodwill at the grassroots level by building a strong relationship with farmers will help it get predictable, quality produces all round the year at stable prices.

As of now Amazon’s mobile app is providing alerts and addresses soil, pests, weather, disease and other crop-related queries. In future, it will start supplying them machines that can help detect defective fruits and vegetables, sort, grade, and pack produce for transport to Amazon Fresh fulfillment centers.

But such efforts are known as time-consuming in the business lexicon, it would take years before Amazon and others see results.

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