Walmart Eyes India E-Commerce Potential with Flipkart Acquisition

Flipkart’s group CEO Binny Bansal who will also take on the role of chairman after Sachin Bansal’s exit and CEO Kalyan Krishnamurthy are expected to remain at Flipkart after the deal goes through

Amazon has committed to invest $5.5 billion in India to expand aggressively.

Son, it was, who first accidentally confirmed the deal on Wednesday to a roomful of reporters and investors, many hours before the official announcement. However, his exit seems to have been driven by the fact that Walmart did not see a role for both the co-founders on the board of the e-commerce startup. Satish Meena, Senior Forecast Analyst at Forrester Research, said while Walmart can utilise its sourcing and retail prowess to aid Flipkart's efficiency, it still needed to come up with a product that can match Amazon's Prime loyalty programme. If they are looking to raise more funds they already have Softbank as a backer.

Walmart plans to link consumers through its partnership with kirana stores.

Flipkart is India's largest e-commerce group on the basis of sales but has been fighting off a huge challenge from Amazon. CEO Bob van Dijk says the group made a decision to sell because with Walmart running the show it will have little influence in future "and we're not a financial investor".

The reason behind the interest of Walmart in this deal is probably due to the fact that by some predictions, India is the upcoming major market in the field of e-commerce and this market is assumed to grow by almost 1/3 and reach a level of $50 billion.

Flipkart and Walmart together will make a formidable enemy for Amazon.

Morgan Stanley has estimated the e-commerce market will grow to $200 billion in India in about a decade, and online sales are growing at about 35 per cent a year.

According to the CEO of B2C e-commerce at Naspers, Oliver Rippel, Naspers has been an integral part of steering the e-commerce platform's growth over the last six years, and this exit marks a triumphant return on investment.

Google's parent company Alphabet is also expected to purchase a small stake, possibly around 10 percent, reports said, citing unnamed sources familiar with the matter.

According to Mudit Jaju, global head of e-commerce at media, content and technology agency, Wavemaker, the focus on Amazon has been a distraction and traditional retailers, like Walmart, can not be ignored.

For the US retailer, acquiring a stake in Flipkart enables it to tap into India's retail market without building stores.

Walmart's foray into India's online retail space sets the stage for an American business war against Inc in the world's fifth largest 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".

"Flipkart will leverage Walmart's omni-channel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength, while Flipkart's talent, technology, customer insights and agile and innovative culture will benefit Walmart in India and across the globe", Walmart said. But in groceries, Walmart-owned Flipkart is still a fringe player.

Experts says Walmart still has an uphill task of competing with Amazon, which it has struggled to do on its own home turf in the US.

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