Walmart’s acquisition of Flipkart has set a new benchmark for those who want dominance in India’s sought-after e-commerce market, literally the last frontier with its 1.3 billion people.
The battle between Flipkart and Amazon has seen the global giant focus on sellers and offerings like Prime, while Flipkart used technology and local knowledge to retain its position as market leader. Meanwhile, Alibaba has been working tangentially, using its stakes in Paytm, Snapdeal, Zomato (via affiliate Ant Financial), Big Basket, and mobile browser UCBrowser (which has a 40% market share in India with 130 million monthly users as of Jan 2018, according to research firm CBInsights) to attack the Indian market in a variety of ways.
Satish Meena, senior forecast analyst at market research company Forrester, says that e-commerce in India isn’t a three-horse race just yet. “Alibaba is predominantly focused on Southeast Asia,” he says, adding that for some time it will still be a battle between Flipkart and Amazon, only that it’s now become a part of Walmart’s effort to keep pace with Amazon worldwide. “Walmart realises that India is a big opportunity and they need to be present now — else the catch-up with Amazon is going to be difficult,” he says.
For Walmart, the investment is just the latest in a series of acquisitions that kicked into high gear with the purchase of Jet-.com in 2017 for $3.3 billion. While Walmart still has a huge lead over Amazon in terms of overall revenues $500 billion to $178 billion its e-sales are a fraction of Amazon’s (Walmart’s US e-commerce was $11.5 billion for 2018 fiscal), and the retailer has been trying to bridge the gap.
And India is key to Walmart’s future, “India is too important a market for Walmart to ignore, especially since it has already saturated the US market. Walmart also knows the disruptive changes in retailing with Amazon’s e-commerce revolution. Walmart acquired Jet.com in the US precisely for this purpose. It’s only feasible entry into India is through Flipkart,” says Vijay Govindarajan, Coxe Distinguished Professor at Dartmouth University’s Tuck School of Business.
Greg Buzek, president, IHL Group, a global research and advisory firm specialising in technologies for the retail and hospitality industries, says Walmart understands their growth opportunities are greatest in creating online marketplaces.
“Walmart needs Flipkart to be in the market at scale. The company gets a nice start in largest potential growth market in the world by buying the top marketplace. They will add products, international items, and once again management, analytics, scale and IT prowess to the market,” he says.
Buzek also believes that it’s possible that an alliance with Alibaba, through Paytm, may be possible for Flipkart and Walmart. “It would not surprise me to see Paytm and the new Walmart-Flipkart partnership come together in some way,” he says. What does it all mean for the end customer though? According to Adrian Lee, research director at Gartner, not much, for now. “Consumers should not expect significant changes in their shopping experience. However, user choice should be improved, with a greater range of Walmart private labels differentiating the merchandise,” he says. “I fully expect discounts/ promotions to continue unabated. As the e-commerce players mature into more profitable businesses, it is very unlikely that discounts will stop. More of the promotional support will be passed back to the suppliers who want the user traffic,” he adds.