11 May, 2018
The acquisition makes the $500-billion Walmart the largest shareholder of the city-based Flipkart group and will help accelerate its mission to transform e-commerce through digital technology. "Further, Flipkart and Walmart will maintain distinct brands and operating structures post this investment", Krishnamurthy wrote to sellers in a mail.
Forrester's Satish Meena, senior forecast analyst said the deal was about more than just cash but ties into offline opportunity and new categories. Flipkart registered 20 shipments in the year of its debut. If they are looking to raise more funds they already have Softbank as a backer. "This will provide them around 54 million active online buyers and a company with 40 percent of the Indian online retail market".
Walmart soon will reach shoppers in India's massive consumer market directly, as it takes control of the online retailer Flipkart that's known for its ubiquitous delivery drivers on motorcycles with oversized backpacks.
Walmart's press release alluded to the possibility of other investors reducing its stake. This can only mean that the discount wars in India's e-commerce are set to play out with greater ferocity. For Walmart, this deal represents a fight for everything it has built over the past five decades and a massive bet on the future of retail.
Speculation about a possible deal had buzzed for months as media reports followed a chess match between Walmart and retail rival Amazon to come to an agreement with Bengaluru, India-based Flipkart.
Reacting over the mega e-commerce deal, India Inc also said the deal would bring maximum foreign direct investment (FDI) to the country.
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Reuters reported earlier that Google's parent Alphabet may buy a roughly 15 percent stake in Flipkart for US$3 billion.
And so, for the price of $16 billion, O'Shea said Walmart's largest deal "becomes much bigger and more profitable down the road". The RSS economic wing called it Walmart's backdoor entry into India, and traders' association CAIT argued the deal would "vitiate Indian e-commerce".
Walmart is famous for their 'Everyday Sale Business Model', wherein massive discounts are given to customers, every day. Walmart is excited about helping farmers make more money and reduce food wastage, he added. The past few years have seen Amazon spend billions of dollars on building out its operations in the nation, which ranks as the world's fastest-growing major economy.
"This may seem like a one-off acquisition in a faraway land, but Indian e-commerce is without a doubt going to be a focus for Walmart".
Steuart Walton, the grandson of Walmart founder Sam Walton, is likely to join the board of Flipkart, said a person familiar with the development. "This investment is of vast importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India".
Overall, if we combine these three factors, then this acquisition of Flipkart by Walmart is a gamechanger for the entire industry, and all stakeholders - entrepreneurs, ecosystem and the customers.