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Flipkart- Walmart Deal: Walmart to aggressively compete with Amazon

Flipkart- Walmart Deal

Walmart has acquired a 77% stake in Flipkart for around USD 16 Billion. The deal now values Flipkart at about USD 21 Billion. The deal is expected to change the domestic retail industries dynamics as well as allow Walmart to aggressively compete with Amazon.

India: Walmart has recently acquired 77% stake in Flipkart for USD 16 Billion, including the USD 2 Billion of primary infusion, thereby sealing the much-anticipated deal. The deal values Flipkart at around USD 20.8 Billion i.e. 4.5 times the Enterprise-value-to-sales in the Fiscal Year 2018.

The Walmart-Flipkart deal is likely to change the domestic retail industry’s dynamics as online & offline partnerships are anticipated to get a boost, even though the online discounting may not necessarily increase. Experts are anticipating that FMCG companies will also benefit as Walmart’s main area of operations lies in hypermarkets/grocery retailing. Walmart is also likely to integrate its cash & carry business with Flipkart in the future, but that is subjected to the regulations imposed by the government of India.

Flipkart has been one of the key players in online fashion since its acquired Myntra and Jabong. The company also has its private label in the apparel segment. Walmart’s expertise in hypermarkets/grocery retailing, will enable Flipkart to make large profits in the online grocery retailing. This would allow a stiffer competition for Bigbasket.

Walmart is present in the B2B cash & carry business in India through 21 Best Price stores. The current regulations permit only 49% FDI in grocery physical retailing, and therefore the key for the new combined company would be their ability to scale up from these levels. Walmart has a strong presence in physical retailing, but its online commerce presence is just 3% of global sales. Its business in India has also been sub-scale.

The acquisition of Flipkart will provide scale to Walmart’s India operations. Flipkart already boosts 100 Million registered users and posts more than 8 Million shipments every month. Walmart and Flipkart are planning to support around 5-6 Million kirana stores by modernization of retail practices as well as digital and cashless transactions for sustainable growth, in an attempt to scale up the business and achieve next leg of growth.

Meanwhile, SoftBank, the Japanese firm is having second thoughts and may take a few days to decide on whether to sell its 21% stake to Walmart. The Japanese investor also sees further valuation upside in Flipkart if it stays invested in the firm. Walmart believes that even if Japanese firm Soft-Bank finally decides against selling its stake in the Indian company, it won’t make any much difference to its plans for Flipkart as Walmart will still hold a majority in the Indian company’s shareholding.

According to TechSci Research, the acquisition of, Flipkart which is one of the most successful Indian e-commerce startups, by Walmart will play a huge role in changing the dynamics of the Indian retail sector. The deal is also expected to strengthen Walmart’s position in India and provide a stiff competition to Amazon. Walmart had a very feeble presence in the Indian market, with around 21 small discount stores, but no presence in the e-commerce space. The acquisition will enable Walmart to directly compete against Amazon, as Flipkart enjoys a huge customer base in India.

Flipkart is one of the key players in the e-commerce business organization in India along with Amazon. Flipkart has overtaken its other competitors like Snapdeal and other web-based retails in the last 10 years.

According to the recently published report by TechSci Research, India E-Commerce Market Forecast and Opportunities, 2020, the country’s e-commerce market is projected to grow at a CAGR of more than 36% during 2015-2020. E-services segment, which comprises online travel, online payments, online classifieds, etc., is expected to continue its domination through 2020. However, the e-tail segment that includes electronics, apparels & accessories, health and personal care, etc., is expected to witness significantly higher market growth compared to e-services segment over the next five years. During 2015-20, the western region is expected to remain the largest e-commerce market in the country. Major players operating in India’s e-tail market include Flipkart, Snapdeal and Amazon. The country’s e-commerce market is forecast to witness staggering growth on the back of increasing working population and growing number of middle class households, which is expected to reach around 53 million by the end of 2015 and is further anticipated to double by 2025.

According to the recently published report by TechSci Research, India Online Grocery Market By Product Type (Food Grains; Bread, Bakery & Dairy Products; Fruits & Vegetables; Personal Care; Dry & Baking Products; Products; Beverages; etc.), Consumer Behaviour, Competition Forecast and Opportunities, 2011 – 2021, the online grocery market in India is projected to grow at a CAGR of 55% during 2016 – 2021. In 2015, among all the products being offered by various e-grocers, food grains accounted for the lion’s share in the overall market, followed by bread, bakery and dairy products. Region-wise, the southern region dominated the country’s online grocery market in 2015 because of increasing number of hi-tech cities in the region coupled with higher awareness among consumers. Few of the leading players operating in the India online grocery market include BigBasket, Grofers and Papertap, among others.

According to the recently published report by TechSci Research, India Teleshopping Market, By Operation Type (Infomercials & Dedicated Channels), By Category, By Payment Mode (Cash on Delivery, Net Banking, Mobile Wallet, etc.), By Source of Order (Television & Internet), Competition Forecast & Opportunities, 2023, India teleshopping market stood around $ 282 million in 2017 and is forecast to grow at a CAGR of around 13% to surpass $ 613 million by 2023, on account of increasing disposable income along with better discounts & offers in comparison to e-commerce websites. Moreover, expanding television penetration in rural areas and rising number of dedicated channels for teleshopping are further expected to aid the growth of teleshopping market in the country through the forecast period.

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