Flipkart and Amazon are India’s largest e-commerce companies and toughest competitors. Amazon has been at the top but, US retail giant Walmart’s acquisition of Flipkart has made their rivalry even more intense. It is now officially declared that Walmart has wrapped up Flipkart’s ownership for $16 billion, a net valuation of over $20 billion, making it the world’s largest e-commerce deal. After this deal, Walmart will own around 77% of Flipkart, which is also being referred to as the US largest buy-out.
In response to this, Flipkart’s arch-rival is leaving no stone unturned to retain its customer base either by expanding or with various deals and exciting offers. The founder of Bengaluru-based company, Sachin Bansal, will be completely out, and now the two US-based giants, Walmart and Amazon will pit in the Indian market. The deal is going to affect everyone, from consumers to competitors, and will definitely shake things up. Here are the predicted outcomes.
Nervous Online Sellers
Walmart, the $500 billion American behemoth comprises a lot of potential to kill small businesses with ultra-low prices. So, online sellers on Flipkart are nervous that their business may get wiped off by Walmart. The fear that Walmart may bring in their own private labels via Flipkart to the Indian market adds on to their competitive pressure.
In an interview with TOI, a spokesperson from the All India Online Vendors’ Association (AIOVA), which has over 3,500 sellers on large platforms like Amazon and Flipkart told that the new label products introduced by Walmart would be brought in at hyper-competitive rates, which will in result cannibalize the Indian market and make it hard for other sellers to operate. He also said that they are analysing the situation and will take necessary action, including the legal route if required.
Walmart has been trying to enter the Indian market for years but has always remained to a ‘cash-and-carry’ business due to tough restrictions on foreign investment. Currently, it varies out its operations over 21 such stores in India.
After four years of breaking its joint venture with Bharti for a cash-and-carry business, Walmart got Flipkart as the arrowhead to have another crack in the Indian market. Although, this time, Walmart’s interest is sharply different.
While all these years, Flipkart rapidly grew its business by absorbing billions of dollars of investor money, its main bait has always been deep & heavy discounts. Walmart’s investment in this Bengaluru-based Company would not only give Flipkart additional funds to compete Amazon but also arm it with a formidable ally with substantial experience in logistics, retailing and supply chain management.
Walmart has been active in a bruising battle with Amazon in the US and elsewhere. Walmart has been desperate to build its own technological arsenal and globalize its business since its Home Company is under danger from Amazon, which is attracting more and more customers to shop online even the basic necessities like whole food. It has already acquired Shoe buy, Jet.com and Bonobos to make its tech muscle stronger, but the results have been mixed as in Japan and China, it struggled hard to make a mark. Now, when Flipkart is on the verge of ending its journey as an independent company, Walmart is all set to begin its journey in India and redeem its Indian business.
According to estimates by researcher Forrester, Amazon closely follows Flipkart, which including its fashion units controls nearly 40% of the Indian online retail market. Amazon has also included offline retail because of Walmart’s push into e-commerce, by associating with the Seattle-based company and picking up a $27.6 million stake in Indian retailer Shopper’s Stop Ltd.
It is surely predicted that the War between Amazon and an empowered Flipkart will shrink the space for smaller retailers because it will ensure that quality, prices and delivery remain highly competitive. On the other hand, customers will be highly benefitted by this war, as they will get a large variety of products at cheaper rates and quicker delivery.
There are many benefits as well, for customers and the economic market due to this great e-commerce deal. With Walmart buying into Flipkart, the competition will grow more intense between Flipkart and Amazon for leadership in the Indian market. Amazon has made investments of around $5 billion for its operations in India. The company would continue to invest in India according to Brian Olsavsky, Amazon CFO as it saw great potential and progress with both customers and sellers here.
The e-commerce war between Amazon and Flipkart will not only contribute to creating a vast infrastructure of the supply chain but also a large number of jobs and employment opportunities.
According to industry data, India’s total consumption is estimated to rise from $1.3 trillion in 2016 to $3.6 trillion in 2027. The retail market is also expected to rise from $650 billion in 2016 to hit $1.8 trillion. Of all this, food and grocery are calculated to be the biggest driver, fixed at $1.1 trillion in 2027 from $420 billion in 2016, which will encourage a similarly substantial and separate investment by Walmart in agriculture.
Due to the competition between Amazon and Flipkart, infrastructure and agriculture sectors will get a big boost and farmers will benefit from increasing demand. It can also amplify overall consumer demand.
Low prices, more variety
The American giant retailer Walmart with its vast experience in a first-world economy will surely bring a revolution in Indian retail with a great variety of consumer goods at low prices. Also, Amazon’s fight-back to compete will ensure that variety and prices remain competitive. Overall, it is a good thing for all the Indian customers.