reflects major changes
in India’s retail sector
Walmart’s announced plan to acquire a majority stake in Flipkart for approximately $16 billion represents an inflection point in the growth of the e-commerce startup and the evolution of Indian retailing over the past five years, since the first BrandZ™ India report launched in 2014. The event also signifies a change in Walmart’s international growth strategy and a new face-off between Walmart and Amazon, which lost the bidding for Flipkart.
Flipkart’s organic growth and growth through acquisitions has worked well until now. Flipkart is India’s No. 1 e-commerce retailer, ahead of Amazon, in the share of spending, according to Kantar IMRB, but Amazon is gaining and leads Flipkart in the number of individuals purchasing on its site. The Walmart deal would help Flipkart accelerate its growth to keep pace and remain competitive against Amazon, with its global advantages and deep pockets.
Flipkart launched in 2007, the year Apple introduced the iPhone and Walmart entered India, through the back door, linking with Bharti Enterprises to form a chain of cash and carry stores and comply with Indian government restrictions against multi-brand retailers, which limited market access for retailers like Walmart, but allowed single-brand retailers to expand.
Amazon launched its India online marketplace in 2013. And as the Amazon example shows, foreign retailers can be both compete and collaborate with small shops. Through its partnerships with Indian retailers, Amazon gained a wide distribution network and burnished its credibility. By partnering with Amazon, local business can reach a wider, even global market.
The potential Walmart-Flipkart tie-up is happening as Indian online purchasing is changing. Mobile phones and accessories, traditional online categories that Flipkart dominates, still drive almost two-thirds of purchases, according to Kantar IMRB, but interest in other categories, like FMCG and fashion, is rapidly increasing. With its recently-launched Prime Now program, Amazon is offering groceries. Amazon partners with grocery chains like Big Bazaar.
The Walmart-Flipkart arrangement also comes in the year when Walmart sold its UK Asda acquisition to Sainsbury, a competitor, and the majority of its Brazilian operations to a private equity firm. Localizing its tremendous economy of scale has been one of the greatest challenges to Walmart’s international growth since it entered Germany in in 1997 and exited less than a decade later.
The potential deal with Flipkart in India, and Walmart’s collaboration with JD.com in China, indicate a new approach for matching local needs and global scale, and focusing on expanding e-commerce reach rather than creating an empire of physical locations. Once the company finishes divesting its UK and Brazil operations, Walmart will operate around 5,250 international stores, and close to 2,800 of those are North American, in Mexico or Canada.
India potentially becomes one more international theater of operations for the ongoing competition between Walmart and Amazon, as each organization aggressively modifies its core DNA—in physical stores for Walmart and e-commerce for Amazon—to leverage data, distribution, and omnipresence and claim leadership in twenty-first century, anywhere, anytime retailing.
And Walmart and Amazon are not alone in their attempts to dominate Indian retailing. Other competitors include Reliance Industries, the conglomerate that reaches Indian consumers with its with vast retail holdings, and its popular telecom provider, Jio. Through a combination of its own stores, relationships with India’s kirana’s, local shops, and Jio apps, Reliance also intends to blend online and offline and solve the challenge of last-mile delivery.
Since announcing its plans to acquire Flipkart, Walmart has attempted to reassure protesting Indian merchants it, too, would be more of a partner than a competitor. These protests will be heard by Indian regulators ruling on the Walmart Flipkart deal. But consumers have a loud voice too, and they may raise it in favor of more brand choice and lower prices.