By Prarthana Mitra
US retail giant Walmart is close to acquiring a majority stake in Flipkart with an investment of $10-12 billion, in a deal that media reports assert will close in the coming week. Two sources close to the matter spoke to Reuters about Walmart’s speedy completion of due diligence procedures earlier this month, after rumours of the acquisition started floating. However other sources have reported saying that negotiations could stretch on till the end of May or early June.
Here’s what happened
The race to acquire retail dominance in an emerging market like India is fiercely competitive and dynamic, among local players and global retailers alike, with both Walmart and Amazon eyeing a larger piece of the Indian e-commerce pie.
Founded by Binny and Sachin Bansal in 2007, Flipkart began as a vision for the Great Indian Dream, a substitute for Amazon which hadn’t yet made a significant entry into this part of the world. Today, together with Myntra, Jabong and eBay, Flipkart now has a 70% market share of the online fashion business in India.
Walmart acquiring controlling stake in Flipkart would enable the both of them to take on Amazon India with renewed fervour. Walmart’s brick-and-mortar infrastructure coupled with Flipkart’s localised and logistical expertise is sure to reap fruits for both companies as well as their customers. If successful, this deal would mark the Doug McMillon-led retailer’s biggest investment in online businesses.
Why you should care
The volume of India’s online shoppers is likely to grow to 50% by 2026, according to a report by Morgan Stanley and experts believe 2019 to be critical for the e-commerce market in the country.
Amazon which entered the Indian retail market in 2013, currently trails behind Flipkart by a slender margin. Although chances are slim if Amazon does succeed in acquiring Flipkart it would raise the former’s control on Indias online retail market to 80% and double its market share.
Walmart, on the other hand, has been struggling to enter the Indian market which has stringent rules and regulations for foreign companies selling directly to Indian customers. If the Walmart-Flipkart acquisition turns out successfully a new economic mapping will be underway for the nation, one that has the potential to further catalyse the thriving retail landscape in India.