The story of Flipkart from selling books online to astonishingly sealing a $16 billion deal with Walmart has set a successful example for every starry-eyed entrepreneur who wishes to establish his/her own business. Although Walmart has bought Flipkart, it will not setup physical stores in India. Instead, it will run the online store of Flipkart.
What is all the fuss about?
Walmart, an American behemoth worth $230 billion approximately, is reputed for wiping out small businesses with its ultra-low prices is now entering Indian markets. Officially, Walmart has signed the $16 billion deal with Flipkart wherein, it will have 77% share of Flipkart. As per the deal, Flipkart will witness the complete exit of its founder, Sachin Bansal. The Bangalore-based company is renowned for its deep discounts. The deal is presumed to be closed by the end of the calendar year of 2018.
Why does Walmart want to buy Flipkart?
Although, Walmart is called ‘beast of Bentonville’, ‘retail behemoth’, and various other names, the fact that Walmart is less popular than Amazon cannot be ignored. The Seattle-based retail mammoth is giving Walmart a tough time. Analysts have also predicted that Amazon can beat Apple and become the first company in the world with the market capitalization of $1 trillion. Amazon has also made remarkable strides in international market especially in the Indian market.
Walmart has been in India for over a decade now but has not managed to grab the retail shares of the Indian market owing to the government’s strict Foreign Direct Investment (FDI) policy. As India is only e-commerce market available for grabs with immense scope for growth and Flipkart holding 45%, it will be beneficial for Walmart to purchase Flipkart. By doing so, Walmart gets direct entry into the Indian market without worrying about the FDI.
What are the benefits of ‘Flip-mart’?
First and foremost is the pricing. Since Walmart and Flipkart both are well known for their discount rates, chances are high that customers might reap the benefits of lower pricing.
Secondly, logistics. India is the country where customers are not only looking for lower rates but also for fast delivery, better products, and better experience. Recently, Amazon has been trying to build the fast delivery mechanism with Amazon Prime. The said service has proved to be a headache for Flipkart. Walmart can provide the tools that can tackle the issue of fast delivery and attract more consumers.
Thirdly, grocery delivery. Flipkart has been struggling to avail the grocery at the large scale. Delivering grocery at the doorstep is the extreme step for the retailer. Walmart being a pro in the grocery game, can prove to be a helpful aid for providing doorstep grocery. Flipkart executive who requested to stay anonymous stated, “Walmart will push towards developing a stronger storage, inventory, and logistics”.
Will it really affect the other businesses?
Speculations are being made that Walmart’s entry in Indian market will wipe out the other minor businesses. The ‘Kirana walahs’ or the local vendors are in quite opposition of the ‘Flip-Mart’ deal. Fearing that Walmart may take up the place of local kirana shops, the shopkeepers plan to approach Confederation of All India Traders (CAIT), which represents over 70 million traders to the Competition Commission of India (CCI).