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Global retail giant Walmart recently acquired 77% stake in Indian e-commerce leader Flipkart for US$16 Bn, making it the world’s largest e-commerce acquisition ever. Despite entering India way back in 2007, Walmart till now, operated only 21 stores catering to B2B segment across the country. It has been almost a decade that the company is finding it difficult to expand its retail operations due to country’s restrictive foreign direct investment policy (FDI) for retail operations. The acquisition will provide Walmart with the much-needed opportunity to expand its service offerings across India.
The Walmart-Flipkart deal is likely to have far-reaching consequences when it comes to the overall retail market in India. Let’s take a look at what it means for the Indian e-commerce sector.
With increased internet penetration — thanks in part to the ‘Jio Effect’, the number of online customers is surging at a rapid pace. E-commerce allows customers to shop from a plethora of products that are not readily available in tier 3 and tier 4 cities, that too at very nominal prices. Customers are not only looking for discounts and quality but are also preferring companies that offer faster shipping. This is where Walmart can make a huge impact. Walmart’s expertise in providing faster deliveries can help Flipkart in meeting the objective. Flipkart has been getting a tough competition from Amazon through its Prime program and Walmart’s experience along with Flipkart’s local expertise might help it in keeping Amazon at bay.
The other related avenues that are likely to get disrupted with Walmart’s entry include supply chain management, farm-to-fork sector and inventory and vendor management. Despite huge potential, the farm-to-fork sector has failed to make an impact in India. Given Walmart’s competence in supply-chain management, the company can provide the much-needed push by enabling the procurement of goods at village level. The entire supply chain is likely to get impacted with, as Walmart will leverage its experience making it more efficient and tech-driven.
This is one segment where Walmart’s association with Flipkart is likely to a massive impact. India’s online grocery space has been heating up recently with players like BigBasket and Grofers actively expanding and competing for market share. Amazon too is trying to make inroads to grocery delivery sector in India. Walmart is the largest grocery retailer in the US and is ahead of Amazon which is actively expanding into the sector after acquiring Whole Foods last year.
Last year, Walmart also acquired New York-based last-mile delivery startup Parcel. Parcel’s routing algorithms enables Walmart to make a delivery within two-hour window. Walmart also recently partnered with Uber, Lyft and Deliv to make same day delivery at select locations. The company is also leveraging its network of stores to make last mile deliveries.
It is expected that Walmart will leverage similar tactics in India and will provide Flipkart with the desired infrastructure for making time-bound grocery deliveries, in a bid to dominate the segment where it competes with Alibaba-backed BigBasket.
Considering the Walmart’s existing infrastructure, the company will likely be pushing its omnichannel strategy. Walmart would be looking to tap its omnichannel retail expertise and supply-chain knowledge backed by Flipkart’s local experience and customer insights. Flipkart is already trying to improve its omnichannel penetration by deploying various strategies with Myntra — Flipkart’s fashion arm. Myntra’s omnichannel initiatives include opening of various offline stores for its private label like Roadsters and also has partnered with brands like Espirit to continue its push.
Walmart’s biggest USP in the US has been its ‘click and collect’ grocery offerings, in which customers can place an order online and then drive to the store to pick it up in two hours with no additional charges.
With Flipkart’s acquisition giving Walmart an online presence in India, the company might look forward in replicating its ‘click and collect’ strategy across the country — wherein Walmart stores will act as a warehouse and would facilitate in making last mile deliveries.
Given Walmart’s retail prowess, Amazon in India might find it difficult to compete with its US rival especially in the food and groceries segment despite having the first mover advantage. The recent investment now officially brings Walmart and Amazon’s rivalry to the Indian market. With both retail tech giants expanding their respective war chests, it will be interesting to see who will rule the e-tailing segment in the world’s fastest growing and third-largest economy.
