Friday, October 3, 2014


e-retailing or on-line marketing has assumed gigantic proportions lately and to day practically every thing consumer wants can be ordered on-line to be delivered at home sparing the consumer the hassles of visiting retail markets in busy cities with traffic snarls becoming a rule rather than the exception. Internationally is the leading e-retailer world over while there are many players fighting for a slice of the cake which is considered to be lucrative. In India there are a few start ups who had established a niche place for them selves before the advent of Amazon's India operations. While Snapdeal and Flipkart can be expected to offer stiff competition to Amazon, India being a large market there seems to be elbow space for every body. Even small players like BigBasket and LiocalBanya are doing well in supplying groceries to consumers through on-line order. If this is so what is the big deal if Amazon also starts groceries and other shelf stable foods in India with its well organized net work of storage and distribution net work created with local partners?

While Amazon has a great reputation in marketing consumer goods in the US and other countries, when it comes to food it is a different ball game altogether. It is true that many packed foods, especially low moisture products and aseptically packed liquid ones have reasonably good life, sufficient to sell them before expiry dates set in. In a country like India where middle class population form the backbone of food market, it is a disturbing question whether a super profit company like Amazon can earn sufficient margins to sustain the activity. According to reports available regarding their objectives in entering into food portfolio, the company may be adopting a "pick and choose" strategy, concentrating more on high value packed foods with attractive profit margins. Thus break fast cereals costing more than Rs 400/kg or health foods priced sky high or potato chips priced above Rs 300/kg or specialty products like olive oil costing upwards of Rs 600/liter and similar products can be the candidates for this retail giant.

The million dollar question is whether these on-line retailers will also eventually get into marketing fresh fruits and vegetables which is considered a high risk area with lower margins. Start-ups like BigBasket and LocalBanya have established their credentials in this segment and shown that such operations are feasible in spite of many logistical constraints. Though consumer response is reported to be satisfactory so far, only time will tell whether these operations can be sustained on an even keel without affecting the quality consistency. In a country like India where horticulture activities are in a highly disorganized state, accessing good quality fresh produce in time and delivering the same to demanding consumers will be an herculean task.

An important point not being appreciated is that fresh produce are bunch of living cells undergoing respiration and transpiration and after harvesting they tend to loose their quality fast due to biological activities. There are proven technologies which can retard such deterioration, though they cannot be stopped altogether. Refrigeration, freezing and controlled atmosphere storage are the chosen ones but specialized infrastructure and high investments are called for if one has to succeed in retailing these products. An on-line retailer will have handicaps if to indulge in handling fresh produce. Probably those who are serious about such activities will have to depend on existing manufacturers and wholesalers to accept their orders and deliver the same to their on-line consumers.

Whether the food safety regulators in the country would keep quite while on-line retailers prepare themselves to get into fresh produce marketing without having their own facilities is some what doubtful. Clear demarcation of responsibilities for ensuring quality and safety will have to be arrived before such retailing can be allowed in the country. While manufacturers have the responsibility to maintain quality and safety whether they will accept the same when their products are marketed by an agency like Amazon since punishment regimes are severe for violating food safety norms in India (if caught!). According to some reports Amazon is already experimenting in Washington State and the State of California in the US to distribute fresh produce through on-line system. Probably such operations will have to be confined within a geographical area of, say about 100 km radius and this calls for a number of holding areas in a state from where quick delivery can be made. One encouraging feature in India is that there are more than 4000 towns each with adequate population to cater to and Amazon may as well concentrate in these urban areas. One has to wait and see how this company will carry out its business, distinct from the existing players, in order to wean away the key board happy consumers!    


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