With Flipkart in its Cart, Can Walmart Make Indian E-commerce More Accessible?
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With a bag in hand, one would walk to the kiraana store, where the shopkeeper knew not just you but your whole family, to buy utilities. The walk back home would include multiple stops at other stores to complete the things marked out in the shopping list.
This is how Indians shopped for years. Until in 2007, a small start-up called Flipkart came about and changed the game. It convinced Indians that they can stay home and everything can reach their doorstep by ordering it online. Most of us who were scared to enter our bank details online, were convinced when the “cash on delivery” option came into our lives. The trust in online shopping increased when Flipkart said that you can return the things you bought online.
This is how Flipkart brought in e-commerce into our lives. A pioneer in Indian e-retail, Flipkart went from your go-to place for books to now, for everything under the sun.
Cut to 2018 and over 11 years, Flipkart has become one of the biggest names in e-retail in the country giving competition to global entrants like Amazon. SoftBank CEO Masayoshi Son has confirmed that retail giant Walmart is buying Flipkart. Softbank which had a 20 percent stake in Flipkart will get t $4 billion in the deal.
One of India’s finest unicorns that made India’s name relevant in the global start-up ecosystem, Flipkart is now ready for the next biggest step, with global biggie Walmart buying upto 75 per cent equity stake in the company.
Entrepreneur India takes a look at how Walmart’s stake in Flipkart, will change the Indian e-commerce industry and more importantly, what’s in it for you.
In a move that could see the biggest names in the start-up industry like Sachin Bansal exiting the company they built from scratch, there’s a bigger offer on the plates for Indian users. An industry body expert we contacted said that whenever there’s a consolidation, the benefit is always for the end users. With e-commerce getting consolidation with Walmart’s stake in Flipkart, it’s going to bring in multiple benefits for the end user.
Walmart To Bring Down Prices?
Flipkart’s finances had been dwindling. In February 2016, days after Flipkart claimed it was valued at a whopping $15.2 billion, Morgan Stanley marked down its stake to a $103.97 a share. This was below the price of its last fundraising round. According to reports, Flipkart had declared a loss of $1.3 Bn (INR 8,771 Cr) in FY17.
The Indian e-retail company was also struggling to keep up with cheaper prices of Amazon. In the US, according to reports, except for foods, Walmart has cheaper prices than Amazon. With Walmart’s entry into the Flipkart board, prices could get cheaper for the Indian users. This could bring back Flipkart’s customers who had switched to Amazon. “Flipkart will now have the price combination which will help the end user. Walmart’s policy of ensuring the cheapest offers will keep the prices well within the reach of the end user,” said the expert.
In its current avatar, the global retail company caters to the kiraana stores giving them an option to buy cheaper stuff from Walmart stores. In a recent interview with Entrepreneur India, Walmart India CEO Krish Iyer said that Walmart in India operates mostly in Tier 2 and Tier 3 cities at this point in time. He reiterated Walmart’s plan to open 50 more stores in a timeframe of 4 to 5 years. “Currently, we have 21 stores and we are on track to open more stores as announced earlier,” Iyer said.
Flipkart too has reported that 70 per cent of its sales come from Tier 2 and Tier 3 cities. Together, they will be able to take over the smaller cities of India, giving tough competition to Amazon which still has a majority presence mainly in metros.
Moreover, Walmart US in October 2017 reported that within two days it can deliver items to 99 per cent of the United States. By bringing in the same prowess to India, they will make e-commerce a faster and more reliable shopping experience for Indian consumers
Finally, a Successful Online Venture for Walmart?
The US-headquartered retail company’s strength lies in physical stores and its online ventures haven’t been as successful given the tough competition they get from Amazon. India is one of the markets that Walmart hasn’t yet been able to establish its stronghold. But with its deal with Flipkart, Walmart will get an edge. Flipkart is reported to have over 100 million consumers with a GMV of $6.5 Billion. This will give Walmart an access to a huge number of consumers in India and be able to ride on Flipkart’s digital advantage to finally take the high road in the e-retail business.
“The government doesn’t allow FDI in multibrand retail in brick and mortar stores which hasn’t worked in Walmart’s favour. Albeit in e-commerce, this will give Walmart the opportunity for multi-brand retail. Maybe one day it will dawn upon the authorities that it's not bad to have too many players. Jack Ma of Alibaba is also looking at the Indian e-commerce space and soon there’s going to be a level playing field for international players in India,” said the industry body expert.