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Walmart-Flipkart to kick • Fighting fit Walmart’s investment will give
Flipkart additional funds to fight Amazon
up new era in retail sector business. This time around, Walmart’s
choice in India is starkly different.
While Flipkart has absorbed billions
of dollars of investor money to rap-
News & Walmart’s move to acquire a controlling stake in Flipkart will start a idly grow its business, its main bait
has been deep discounts. Walmart’s
new era in India for both online and offline retail which will benefit
views the entire retail sector investment would give Flipkart not
just additional funds to fight Amazon,
Bharat hiteshi but also arm it with a formidable
ally with extensive experience in
almart has for years straight away. No other market, apart retailing, logistics and supply chain
Hiteshi is an tried to enter India from China and the US, offers such a big management.
independent journalist- but had remained opportunity for Walmart. In the US, it is Walmart has been engaged in a
turned-author and a confined to a ‘cash- already a leader and in China, Alibaba is bruising battle with Amazon — in the
political commentator. and-carry’ wholesale clearly a dominant player. The deal was for several stakeholders across the tions ever — a clear acknowledge- US and elsewhere. While its home
The views expressed W business amid tough an attempt by Walmart to control and board. The deal completely redraws ment that Walmart is trying hard to turf is under threat from Amazon,
are his own restrictions on foreign investment. It dominate India’s retail trade through e- the e-commerce landscape in India make up for lost time by not investing which is pushing more and more
currently operates 21 such stores in commerce which was a bridge to reach and escalates Walmart’s global battle more aggressively on e-commerce people to shop online and even buy-
India. out to the offline retail market. against Amazon.com Inc., its biggest earlier. The major beneficiaries are ing old-school players like Whole
Dong McMillon, President, and CEO, The Walmart wrapping up Flipkart rival in the US. Several tens of billions Flipkart stakeholders including Foods, Walmart has been desperate
Walmart, observed after the deal: acquisition for $16 billion, a valuation of dollars are at stake on both the investors, founders, and employees. to globalise its business and build its
“India is one of the most attractive of over $20 billion, makes it the world’s sides. While this has been a positive A number of current employees have own technological strength. The war
retail markets in the world, given its size biggest e-commerce deal. Walmart will outcome for this Flipkart and all turned dollar millionaires overnight, between an empowered Flipkart and
and growth rate.” That shows how much own around 77 per cent of the Bengalu- its stakeholders, the e-commerce while early investors such as Accel Amazon will shrink the space for
significance the deal carries for Walmart. ru-based company in what is also being landscape in India now is essentially Partners and Tiger Global Manage- smaller players because it will ensure
The move would also trigger consolida- seen as the largest buyout for the US going to be dominated by two Ameri- ment, and even late-stage investor, that prices, quality, and delivery
tion in the market and will allow the sec- firm. The deal, which will see founder can giants. Japan’s SoftBank Group, have made remain highly competitive.
tor to respond to market need gaps in the Sachin Bansal of Chandigarh region exit a killing — Accel, Tiger, and Softbank India’s total consumption is
right manner. New categories like food completely, will now pit US-based giants Biggest acquisition put together have raked in an exit of expected to rise to $3.6 trillion in 2027
and groceries that are very big but have Walmart and Amazon in the Indian mar- The Flipkart deal is the most sig- over $8 billion. This deal should catch from $1.3 trillion in 2016, according
not moved online will receive attention. ket. The deal is going to shake things up. nificant acquisition in the history of the eye of a number of large, foreign to industry data. The retail market is
Marketing intensity will reduce and Walmart’s investment includes $2 bil- Walmart and for Walmart, this deal strategic investors who have been expected to hit $1.8 trillion from $650
these are all the positives in the maturing lion of new equity funding, this will help represents a fight for everything it eyeing India for a long time. Broader billion in 2016. Of this, the biggest
of the sector. The deal is very positive for Flipkart accelerates growth in future. has built over the past five decades start-up funding is expected to go up, driver is expected to be food and
both e-commerce and the retail sector The world’s biggest retail deal will im- and a massive bet on the future of while the number of ventures start- grocery, pegged at $1.1 trillion in 2027
in general. The sector will now be known pact the whole segment, the competitors, retail. Flipkart will be the centerpiece ing out is also expected to rise, after from $420 billion in 2016, which will
as the custodian of the largest FDI deal in and the consumers. The online sellers on of Walmart’s global e-commerce witnessing two consecutive years of drive a separate and similarly sub-
India. This has overtaken the $12.9 billion Flipkart are jittery because Walmart can ambitions, given India’s stand of decline. The Indian e-commerce has stantial investment by Walmart
Rosnoft acquisition of Essar Oil. wipe them off. Walmart, a $500 billion being one of the world’s last remain- been both a winner and loser because in agriculture.
While Walmart Leveraging strengths American behemoth, has a reputation of ing major internet economies. While of this deal. While Flipkart’s buyout Gains
killing small businesses with ultra-low
Amazon has missed out on an op-
marks the biggest victory ever for
and Flipkart will While Walmart and Flipkart will lever- prices. They fear that Walmart might portunity to buy out Flipkart, it will an Indian Internet start-up, it also The agriculture and infrastructure
leverage the age the combined strengths of both the bring in its own private labels via Flip- be business as usual for the world’s means that for the foreseeable future, sectors will get a big boost due to
kart to the Indian consumers, adding to
largest online retailer. Company
competition between Flipkart and
companies, they will maintain distinct
the online retail business in India
combined strengths brands and operating structures. The on- competitive pressures. insiders at Amazon said that they had will be controlled firmly by two large Amazon. Farmers will benefit from
For the Indian start-up and venture-
of both the firms, line retail market till now has largely piv- capital (VC) ecosystem, this deal is the long anticipated a situation where American companies — Walmart and increasing demand. It can also
oted around fashion and electronics but,
boost overall consumer demand.
Amazon. It will be a bruising battle for
they might have to fight Walmart
they will maintain these sectors control only 20 per cent of most triumphant moment, marking in India. Moreover, from Amazon’s supremacy. New jobs will be created through
Now, Flipkart will be positioned as
distinct brands the total retail pie. Many other categories a remarkable victory for an Internet perspective, its domination as the the arrowhead for Walmart to have the development of supply chains,
commercial opportunities, and direct
start-up that was launched a decade ago
are yet to move online and that may look
global online retailer has forced its
and operating appetising for Walmart. The Flipkart in a country that has for the longest time biggest American rival Walmart to another crack at the Indian market, employment.
structures deal offered Walmart the opportunity been starved of major m start-up exits. fork out $16 billion for what is easily four years after it broke its joint ven- letters@tehelka.com
This deal also has massive ramifications
ture with Bharti for a cash-and-carry
one of the most expensive acquisi-
to catapult into a leadership position
Tehelka / 31 may 2018 44 www.Tehelka.com Tehelka / 31 may 2018 45 www.Tehelka.com
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