February 12, 2018
After battling it out for years on their home turf, two of America’s largest retailers may soon fight each other in India.
Arkansas-based Walmart is reportedly in talks to acquire a significant minority stake in India’s largest home-grown e-commerce firm, Flipkart.
February 12, 2018
After battling it out for years on their home turf, two of America’s largest retailers may soon fight each other in India.
Arkansas-based Walmart is reportedly in talks to acquire a significant minority stake in India’s largest home-grown e-commerce firm, Flipkart.
If the deal goes through, Walmart will be joining forces with Amazon’s biggest rival in India. A traditional brick-and-mortar retailer, Walmart has reinvented itself to give the world’s largest e-commerce player stiff competition as American shoppers shift online.
This rivalry could now reshape India’s e-commerce landscape.
“The biggest impact this investment will have is that now Flipkart will have an investor who understands retail and has done it at scale,” said Yugal Joshi, vice-president at Texas-based consulting and research firm Everest Group. “But given their history, Amazon must be prepared for such a move by Walmart.”
Flipkart did not respond to an email from Quartz. “As a policy, we don’t comment on speculation,” a Walmart India spokesperson said.
Walmart in India
Walmart announced its entry into India in 2007 but its ride here has been far from smooth, given the country’s restrictive policies and a failed joint venture with local partner Bharti Enterprises.
The company’s presence in Asia’s third-largest economy is limited to around 20 wholesale—or business-to-business (B2B) stores—under the Best Price brand name. In a bid to expand its footprint, in 2014, Walmart said it would take these stores online.
Having an online presence could give Walmart a further play in India’s retail market, worth over $670 billion. The market itself is undergoing a transition as shoppers rapidly shift to the internet. By 2026, India’s online retail is estimated to grow by 1,200% to $200 billion (Rs13.3 lakh crore) and comprise 12% of its overall retail trade, up from just 2% in 2016.
Investing in Flipkart could go a long way in getting a piece of that pie.
The Bengaluru-based unicorn is India’s most-funded internet company, backed by marquee investors like Japan’s Softbank, South Africa’s Naspers, and the US’s Tiger Global.
The 10-year-old firm, started by IIT-Delhi alumni Sachin Bansal and Binny Bansal (not related), has held strong even as local rival Snapdeal failed to stay afloat and e-commerce veteran Amazon invested billions of dollars.
Walmart vs Amazon
Back in the US, Amazon and Walmart have been at loggerheads.
The latter has slowed down the pace of opening new stores to focus on online—offering fast and free shipping—to compete with Amazon’s Prime shipping service. Last June, Walmart said it would turn its 1.5 million employees in the US into delivery drivers by giving them the option of earning extra by delivering packages on their way home after work.
The company is also trying to establish itself in the high-margin fashion segment, also a focus area for Amazon. In November, Walmart partnered with department store Lord & Taylor to “create a premium fashion destination on Walmart.com.”
In the US, Walmart has acquired at least three e-commerce websites, Jet.com, ShoeBuy.com, and Moosejaw.com, to boost its online play. Jet.com co-founder Marc Lore now heads Walmart’s e-commerce business while ShoeBuy.com competes with Amazon’s subsidiary Zappos. In Japan, Walmart has forged an alliance with Japanese e-commerce firm Rakuten Inc.
A similar strategy could now be rolled out in India.
“The investment in Flipkart is more about Walmart wanting to invest in a rival of Amazon than Flipkart wanting the money,” Joshi of Everest Group said. “Flipkart could have raised money from other investors but it is Walmart’s corporate strategy that the company is executing in India.”
Courtesy/Source: Quartz
