According to Bloomberg, Walmart hopes to acquire a controlling interest in Flipkart for US $12 billion or more and announce the agreement in as many as two weeks. Bloomberg, which cited sources in its report, said that the entire Flipkart board has signed on to the investment. If Walmart can clear a few more hurdles to get the deal done, the company could soon be a prominent player in India’s exploding retail market.
According to N Chandramouli, CEO, TRA Research, “The Walmart-Flipkart deal will be a disrupter in online retail industry in India. Walmart’s partnership and investment in Chinese online store, JD.com is the model that they will probably replicating in India as well. The Walmart-JD.com partnership in China has turned the applecart for Amazon in the country and this new partnership has the potential to do the same in India.”
He further added, “The partnership of the two giants, Walmart and Flipkart, will provide a new model by creating a mixed on-ground–online ecosystem difficult to replicate easily. Not only will Flipkart get access to nearly 2,000 of Walmart’s products exclusively, but Walmart will also get the well-established e-tailing delivery system that Flipkart has sharpened over the years, giving it logistics support throughout India.”
A deal with Walmart could help SoftBank-backed Flipkart to not only add financial muscle but also strengthen supply chain and enhance efficiency in procurement and product assortment.
“We are also likely to see another disruption that will come with the Walmart-Flipkart partnership. Due to Walmart’s strong base in grocery, this entity is also likely to go very aggressive on selling grocery products online very soon, and apart from giving Amazon a run for their money in this area, online grocery retailers like Bigbasket, Grofers are likely face the brunt of it,” he asserted.
“Also, the combination of the duo will help enhance the brand trust in e-tailing with the consumer, with counterfeits becoming common in all types online purchases thus far. All-in-all, consumers will certainly benefit in convenience, quality, variety, due to such large players entering the Indian online-retail turf,” he further added.
Walmart, meanwhile, has done little in India. But a Flipkart acquisition clearly positions the retailer as a direct competitor to Amazon and opens yet another front in their international battle.
A Flipkart investment would likely be Walmart’s biggest deal in almost two decades and strike a blow against rival Amazon.com Inc., which holds 27 percent of India’s US $30 billion e-commerce market, according to data tracker Euromonitor.
If the deal between Walmart and Flipkart materialises, the war between Amazon and Walmart would spill over into India, the fastest growing market for the Jeff Bezos founded company.
For Flipkart, the talks have come at an opportune time. The e-commerce behemoth, which is currently at No.1 slot in India, is struggling to maintain its leadership position with Amazon closing the gap fast.