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The bigger story is how India's larger retail landscape will or won't change in the years ahead.
On the face of it, the US retail giant Walmart buying out India’s homegrown online retail company Flipkart for $16 billion may seem like a ringing endorsement of Indian entrepreneurship in the e-commerce space.
But a closer look at the global backdrop in which Walmart has chosen to pay such a stupendous price for Flipkart shows that India will be the Kurukshetra for the mega battle between the two global retail behemoths Walmart and Amazon.
The BJP and the Sangh parivar have generally been cautious, even paranoid, about opening up the Indian multi-brand retail sector to foreign investment. However, with Walmart entering the online retail space, it is only a matter of time before it has a profound impact on the overall retail sector.
Of course, one legitimate question that will remain on everyone’s lips is why Flipkart couldn’t fulfill the promise of becoming a truly homegrown online retail giant, like Alibaba of China. Will India eventually be colonised by global online retailers?
The answer to this comes in two parts. Firstly, nowhere has the promise of India’s booming middle class proven to be more hollow then when it comes to how e-commerce sales have panned out over the last three years. One analysis points out that on investments of $15 billion in the online retailing space, India’s e-commerce market has thrown up online retail sales of roughly the same figure.
What’s worse is that growth slowed in 2015 and has very nearly plateaued over the last two years. While various estimates place India’s middle class at anywhere between 300 million to 400 million people, the number of online shoppers tops out at 80 million to 100 million. This figure is probably even lower when you take into account the number of active shoppers.
Secondly, from late 2014 to 2016, Flipkart also slumped on the operational and customer experience front, ceding ground to Amazon, while failing to build a second rung of leadership with strong retail experience.
The Walmart deal, or really any acquisition, was largely foretold back in January 2017 itself when Flipkart’s largest investor Tiger Global asserted itself and had Kalyan Krishnamurthy take over as CEO of the company from co-founder Binny Bansal. While the Bansals (Binny and Sachin) will be rightly lauded for what they have achieved, some will always see them, as one market watcher put it, as “entrepreneuritis interruptus”.
The roadmap for the next five years therefore is clear: India’s online retailers will need to tap into the next 100-150 million shoppers, largely in Tier-2 and Tier-3 towns which will require new strategies and a veritable powder-keg of capital.
Therefore, a player like Walmart, which can keep pumping patient capital for a long period of time, and be a perfect bulwark against the might of Amazon. Sadly, no Indian player will be on the scene after a decade.
Ripples on India’s retail landscape
The bigger story, consequently, is what will happen to the grass underneath the Indian retail sector, both offline and online, when the two big elephants, Walmart and Amazon, battle it out for control of the growing Indian market. This has serious implications for both online and offline retail in India.
Walmart and Amazon are already engaged in an intense contest for market share in the US. With this deal, Walmart wants to partly shift the theatre of action to India, if only to gain some respite back home in the US. Walmart is way behind Amazon in the online retail market share though it is the biggest in offline retail. Online retail has over 15% share of total retail market in the US. In India, online is less than 3% of the retail industry. So India offers Walmart huge incremental potential in online retail.
Walmart has deep pockets globally. Consider the sheer scale of operations – Walmart has $500 billion plus revenue globally and the total Indian retail turnover annually is also close to that ($672 billion). So India’s retail market is about the same as Walmart’s annual turnover. Flipkart, with about $7 billion annual revenue, has a 1.04% share of India’s total retail market. Amazon has an equal share as Flipkart in India. Online retail is growing at nearly 45% in India though the current share of online retail is 2.6% of the total retail sector in the country.
Walmart would like to bleed Amazon in the Indian market, which is generally considered difficult to penetrate by foreigners. With Flipkart in its bag, Walmart has a head start in India and can hit the ground running in its fight with Amazon.
What implications does this have for India’s retail sector?
In January this year, the Union cabinet approved 100% foreign direct investment through automatic route in single brand retail. However, multi-brand retail still remains off-limits for foreign investors, mainly because of its potentially harmful impact on small shopkeepers.
Small businesses and traders are considered an important political constituency of the BJP. That is the reason why, even within the RSS and BJP, there is no consensus over opening up multi-brand retail for FDI inflows. For example, Swadeshi Jagran Manch (SJM), an RSS affiliate, remains strongly opposed to any suggestion of opening up the business for foreign players.
But when Amazon and Walmart duel for control of Indian retail market in coming days, it would be difficult for the Modi government to maintain status quo on the policy front.
Ashwani Mahajan, SJM co-convenor, has written to Prime Minister Narendra Modi and commerce minister Suresh Prabhu, to seek their intervention to block the Walmart-Flipkart deal as FDI is not allowed in multi-brand retail.
“Walmart is using the ecommerce route to circumvent the rules to attack Indian market. It is to be noted that nowhere in the world, Walmart has a marketplace model,” Mahajan has conveyed his concern over the Flipkart deal to the prime minister.
Mahajan added, “Most of small and medium enterprises and small shops are already battling for their existence. Entry of Walmart will further create problems for them.”
In his letter sent to Prabhu earlier, Mahajan expressed fear that after Walmart’s entry into Indian retail space, inflows of Chinese goods could further increase, as the US retail behemoth is the seventh largest importer of Chinese merchandise in the world, inflating country’s trade deficit.
Stakes are high for Walmart in India as it has missed ecommerce bus in its home market. It accounted for 3.6% in the total ecommerce sales in the US market in 2017, way behind Amazon’s 43.5%.
It has also failed to crack the China market due to stiff competition from home-grown Alibaba. In 2016, it sold its online retail business Yihoadian in China to JD.com for 5% stake in that company.
Walmart’s operations are facing trouble in Brazil and UK markets, too. Learning its lessons from these failures, Walmart is now changing its strategy to enter foreign markets. The US retail giant has hinted it would prefer to enter foreign markets in partnership with a local player rather than try to crack them on its own.
https://thewire.in/business/as-walmart-swallows-flipkart-the-dream-of-an-indian-alibaba-is-dead
On the face of it, the US retail giant Walmart buying out India’s homegrown online retail company Flipkart for $16 billion may seem like a ringing endorsement of Indian entrepreneurship in the e-commerce space.
But a closer look at the global backdrop in which Walmart has chosen to pay such a stupendous price for Flipkart shows that India will be the Kurukshetra for the mega battle between the two global retail behemoths Walmart and Amazon.
The BJP and the Sangh parivar have generally been cautious, even paranoid, about opening up the Indian multi-brand retail sector to foreign investment. However, with Walmart entering the online retail space, it is only a matter of time before it has a profound impact on the overall retail sector.
Of course, one legitimate question that will remain on everyone’s lips is why Flipkart couldn’t fulfill the promise of becoming a truly homegrown online retail giant, like Alibaba of China. Will India eventually be colonised by global online retailers?
The answer to this comes in two parts. Firstly, nowhere has the promise of India’s booming middle class proven to be more hollow then when it comes to how e-commerce sales have panned out over the last three years. One analysis points out that on investments of $15 billion in the online retailing space, India’s e-commerce market has thrown up online retail sales of roughly the same figure.
What’s worse is that growth slowed in 2015 and has very nearly plateaued over the last two years. While various estimates place India’s middle class at anywhere between 300 million to 400 million people, the number of online shoppers tops out at 80 million to 100 million. This figure is probably even lower when you take into account the number of active shoppers.
Secondly, from late 2014 to 2016, Flipkart also slumped on the operational and customer experience front, ceding ground to Amazon, while failing to build a second rung of leadership with strong retail experience.
The Walmart deal, or really any acquisition, was largely foretold back in January 2017 itself when Flipkart’s largest investor Tiger Global asserted itself and had Kalyan Krishnamurthy take over as CEO of the company from co-founder Binny Bansal. While the Bansals (Binny and Sachin) will be rightly lauded for what they have achieved, some will always see them, as one market watcher put it, as “entrepreneuritis interruptus”.
The roadmap for the next five years therefore is clear: India’s online retailers will need to tap into the next 100-150 million shoppers, largely in Tier-2 and Tier-3 towns which will require new strategies and a veritable powder-keg of capital.
Therefore, a player like Walmart, which can keep pumping patient capital for a long period of time, and be a perfect bulwark against the might of Amazon. Sadly, no Indian player will be on the scene after a decade.
Ripples on India’s retail landscape
The bigger story, consequently, is what will happen to the grass underneath the Indian retail sector, both offline and online, when the two big elephants, Walmart and Amazon, battle it out for control of the growing Indian market. This has serious implications for both online and offline retail in India.
Walmart and Amazon are already engaged in an intense contest for market share in the US. With this deal, Walmart wants to partly shift the theatre of action to India, if only to gain some respite back home in the US. Walmart is way behind Amazon in the online retail market share though it is the biggest in offline retail. Online retail has over 15% share of total retail market in the US. In India, online is less than 3% of the retail industry. So India offers Walmart huge incremental potential in online retail.
Walmart has deep pockets globally. Consider the sheer scale of operations – Walmart has $500 billion plus revenue globally and the total Indian retail turnover annually is also close to that ($672 billion). So India’s retail market is about the same as Walmart’s annual turnover. Flipkart, with about $7 billion annual revenue, has a 1.04% share of India’s total retail market. Amazon has an equal share as Flipkart in India. Online retail is growing at nearly 45% in India though the current share of online retail is 2.6% of the total retail sector in the country.
Walmart would like to bleed Amazon in the Indian market, which is generally considered difficult to penetrate by foreigners. With Flipkart in its bag, Walmart has a head start in India and can hit the ground running in its fight with Amazon.
What implications does this have for India’s retail sector?
In January this year, the Union cabinet approved 100% foreign direct investment through automatic route in single brand retail. However, multi-brand retail still remains off-limits for foreign investors, mainly because of its potentially harmful impact on small shopkeepers.
Small businesses and traders are considered an important political constituency of the BJP. That is the reason why, even within the RSS and BJP, there is no consensus over opening up multi-brand retail for FDI inflows. For example, Swadeshi Jagran Manch (SJM), an RSS affiliate, remains strongly opposed to any suggestion of opening up the business for foreign players.
But when Amazon and Walmart duel for control of Indian retail market in coming days, it would be difficult for the Modi government to maintain status quo on the policy front.
Ashwani Mahajan, SJM co-convenor, has written to Prime Minister Narendra Modi and commerce minister Suresh Prabhu, to seek their intervention to block the Walmart-Flipkart deal as FDI is not allowed in multi-brand retail.
“Walmart is using the ecommerce route to circumvent the rules to attack Indian market. It is to be noted that nowhere in the world, Walmart has a marketplace model,” Mahajan has conveyed his concern over the Flipkart deal to the prime minister.
Mahajan added, “Most of small and medium enterprises and small shops are already battling for their existence. Entry of Walmart will further create problems for them.”
In his letter sent to Prabhu earlier, Mahajan expressed fear that after Walmart’s entry into Indian retail space, inflows of Chinese goods could further increase, as the US retail behemoth is the seventh largest importer of Chinese merchandise in the world, inflating country’s trade deficit.
Stakes are high for Walmart in India as it has missed ecommerce bus in its home market. It accounted for 3.6% in the total ecommerce sales in the US market in 2017, way behind Amazon’s 43.5%.
It has also failed to crack the China market due to stiff competition from home-grown Alibaba. In 2016, it sold its online retail business Yihoadian in China to JD.com for 5% stake in that company.
Walmart’s operations are facing trouble in Brazil and UK markets, too. Learning its lessons from these failures, Walmart is now changing its strategy to enter foreign markets. The US retail giant has hinted it would prefer to enter foreign markets in partnership with a local player rather than try to crack them on its own.
https://thewire.in/business/as-walmart-swallows-flipkart-the-dream-of-an-indian-alibaba-is-dead
seriously. Please name few Indian based company who are giant in manufacturing and compete the world outside India. Waiting for your reply
