Amazon plans to build large delivery hubs for Amazon Fresh in India

Amazon plans to build large delivery hubs for Amazon Fresh in India

Amazon is looking to build two large delivery hubs in Bengaluru and Hyderabad for its Amazon Fresh two-hour grocery and fresh produce retailing service, a person aware of the development said, as the American ecommerce company increases its bet on the market for daily essentials ordered online.

Plans to build the large delivery hubs have been approved internally at Amazon in the backdrop of chief executive Jeff Bezos’ visit to India, during which he announced a fresh $1 billion investment commitment to grow ecommerce exports out of the country. The new hubs will consolidate the small grocery delivery hubs that Amazon uses today in the two cities.

“The plan has been approved and the designs have been shared, the work starts now,” the person told ET, on the condition of anonymity. “The smaller hubs were not working out and a decision was made to consolidate Amazon Fresh deliveries from a single location in order to scale the business.”

“We have 15 Amazon Fresh nodes across four cities in India (Bengaluru, Hyderabad, Delhi-NCR and Mumbai). We do not comment or speculate on what we may or may not do in the future,” an Amazon spokesperson said in an emailed response to ET’s questions.

Launched in August last year, Amazon Fresh is an extension of the company’s two-hour Prime Now delivery service. While in its earlier avatar of Prime Now the company would service orders for groceries and fresh produce through partner offline retailers, with Fresh it controls the supply chain end to end.

While Amazon is installing its own delivery hubs, the inventory sold through Fresh is also largely controlled by the ecommerce company. For fresh produce, all listings are by Amazon Retail, a wholly owned entity of Amazon which has received a Food Retail license from the government. Groceries on the other hand are sold by three sellers — Amazon Retail, Amazon Retail Pantry and Cloudtail.

Cloudtail is owned by Prione Business Services in which Amazon has reduced its stake from 49% to 24% in order to remain compliant with local rules. The remainder of the stake in Prione is owned by Infosys founder NR Narayana Murthy’s Catamaran Ventures.

According to market researcher Forrester, India’s food and grocery market was valued at $600 billion in 2019, with online sales making up just about 0.3% of that at $1.8 billion. However, there’s massive room for growth in the online grocery market over the next one decade as more people pick the convenience of having it delivered to their doorsteps.

“Food and grocery makes up the largest part of India’s retail market which is why everyone is going after it,” said Satish Meena, a senior forecast analyst at Forrester Research. “It’s also the only category where players get to own their own inventory unlike all other categories, be it smartphones, apparel, etc.”

While the online grocery market is fairly untapped and up for grabs, there’s a three-way war brewing among Walmart-owned Flipkart, Amazon and India’s largest retailer, Reliance Retail.

ET reported on January 17 that Flipkart had begun piloting the sale of fresh fruits and vegetables in Hyderabad through its grocery delivery platform, Supermart. The company is said to be readying itself to apply for a food retail licence similar to the one Amazon Retail has, which will allow it to have its own inventory of food and groceries produced in India.

Reliance Retail, the largest organised retailer in the country, not only has an extensive presence of Reliance Fresh stores across the country, but is also readying its own ecommerce play, which will rely on a combination of servicing orders from its own stores as well as through partner kirana stores.

Meena of Forrester Research said the competition among the three in the online grocery space could push for higher cash burn in the segment in the coming few years, which could hurt current leaders BigBasket and Grofers and further force the industry to consolidate. Moreover, he estimates that grocery would be among the fastest growing categories online in the current decade.

Source:- economictimes


You may also like...