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There is speculation that Walmart Inc. is planning to invest close to US$1 billion in India’s home grown retailer, Flipkart Online Services Pvt Ltd (Flipkart.com). In case this deal does goes through, Flipkart.com backed by Walmart will be India’s answer to the massive growth plans that Amazon.com has for the country.
Walmart entered India back in 2006, in 50/50 partnership with Bharti Retail. However, due to the restrictive foreign direct investment (FDI) policies in the country, the retail partnership ended after seven years in 2013. The company during this partnership also launched Best Price Modern Wholesale in May 2009. The brand is managed by its India arm, Wal-Mart India Private Limited. These business to business (B2B) outlets continue to be operational in the country, with the current count standing at 21 stores. The company also launched its e-commerce platform for the B2B customers, and it is quite a successful channel as well.
An investment in Flipkart will give Walmart another opportunity to sell directly to consumers and improve its presence in the global ecommerce market, particularly after its investment in the Chinese etailer JD.com in 2016.
One of the key results of Walmart’s interest in Flipkart will bring the global war between Walmart and Amazon to India. According to Euromonitor International, Amazon.com Inc held 12% value share in 2016 in internet retailing. In India, Amazon.in despite not being market leader in internet retailing, was amongst the fastest growing ones in 2016.
Amazon.com is serious about its expansion plans in India. The total investments made by the company in India as of mid-2016 was close to US$5 billion. The company has the financial backing from its international headquarters and can wait it out till online business becomes profitable in India, which as of 2016 still wasn’t.
CEO of the company in July 2014 said “After our first year in business, the response from customers and small and medium-sized businesses in India has far surpassed our expectations. We see huge potential in the Indian economy and for the growth of e-commerce in India. With this additional investment of US $2 billion, our team can continue to think big, innovate, and raise the bar for customers in India. At current scale and growth rates, India is on track to be our fastest country ever to a billion dollars in gross sales. A big ‘thank you’ to our customers in India – we’ve never seen anything like this.”
Given Walmart’s interest in India and online retail, it will not raise a white flag, without giving a tough competition to Amazon both in India and globally. For the Indian consumers, this should be an exciting time to shop online, as this space is expected to become more formalised and authentic in its operations. For the retailers, profitability might still seem like a distant dream, however, with big companies investing in the country, this channel will continue to grow at the top line.