Walmart’s shift to become a marketplace and to take on Amazon has stepped up a gear with the retailer confirming a $16 billion investment in Indian ecommerce platform Flipkart.
The move marks Walmart’s transformation into an Amazon-esque marketplace and taps into the massive and growing Indian market – tipped by Gartner to grow at four times that of the developed world. It also shows why the retail giant is so keen to divest itself of Asda in the UK, where growth is currently low to non-existent.
The investment will help accelerate Flipkart’s mission to transform ecommerce in India through technology and is one in the eye for Amazon, a would be early suitor for FlipKart.
Although working together, Walmart and FlipKart will maintain their separate brands in the country, where Flipkart already has a well-defined presence and where Walmart India already operates 21 Best Price cash-and-carry stores and one fulfilment centre in 19 cities across nine states in the country.
“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market. As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market. Our investment will benefit India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.”
– Doug McMillon, Walmart’s president and chief executive officer
Founded in 2007, Flipkart has led India’s eCommerce revolution. The company has grown rapidly and earned customer trust, leveraging a powerful technology foundation, including artificial intelligence, and emerging as a leader in electronics, large appliances, mobile and fashion and apparel.
In a market where Walmart expects eCommerce to grow at four times the rate of overall retail, and with well-known platforms such as Myntra, Jabong and PhonePe, Flipkart is uniquely positioned to leverage its integrated ecosystem, which is defined by localised service, deep insights into Indian customers and a best-in-class supply chain.
Flipkart’s supply chain arm, eKart, serves more than 800 cities, making 500,000 deliveries daily.
In the fiscal year ended March 31, Flipkart recorded GMV of $7.5 billion1 and net sales of $4.6 billion representing more than 50 percent year-over-year growth in both cases. With the investment, Flipkart will leverage Walmart’s omni-channel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength, while Flipkart’s talent, technology, customer insights and agile and innovative culture will benefit Walmart in India and across the globe.
The Flipkart investment transforms Walmart’s position in a country with more than 1.3 billion people, strong GDP growth, a growing middle class and significant runway for smartphone, internet and eCommerce penetration.
“This investment is of immense importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India. While eCommerce is still a relatively small part of retail in India, we see great potential to grow. Walmart is the ideal partner for the next phase of our journey, and we look forward to working together in the years ahead to bring our strengths and learnings in retail and eCommerce to the fore.”
– Binny Bansal, Flipkart’s co-founder and group chief executive officer
But it isn’t a done deal yet. Softbank, one of Flipkart’s investors, have been caught wrong footed not expecting a deal to close quickly. They’re apparently wanting to hold off on the sale of their shares for perhaps a year to figure out how to avoid a massive tax liability.
That said, eBay is selling its holdings in FlipKart and relaunching eBay Indiain the wake of the deal. eBay’s involvement with Flipkart was one of the problems with the Flipkart acquisition by Amazon, but it looks like eBay doesn’t want to be involved with a Walmart owned company in India.
eBay and Flipkart’s arrangement was an interesting and innovative way to approach the problem of US companies getting its share of online retail in India, but now it looks like it will return to a more traditional model and offer something much like Amazon. The three US companies now look likely to fight it out ever more strongly in what is already a competitive arena.
Walmart already has overseas form, opening a physical grocery store in China while selling its wares through a branded online store on JD.comas it looks to undermine Alibaba’s hegemony over the China’s ecommerce market.
JD.com – a slice of which is owned by Walmart – is already selling Chinese-made, US Walmart branded electronics goods to Chinese shoppers, as well as setting up JD.com electronics ‘showrooms’ in Walmart stores across China to sell white and consumer electronics goods. Now the relationship is being switched around to sell groceries in a high tech store.