By Prarthana Mitra
Hours after Softbank confirmed on Wednesday that Walmart will be purchasing controlling stake in Flipkart, the global retail giant formally closed a $16 billion deal, bringing months of speculation to an end that included rumours of a rival bid from Amazon.
Here’s what happened
Walmart will now own around 77% of the Bengaluru-based company, which is the largest buyout for the US firm. Softbank CEO Masayoshi Son announced that this was the biggest deal in the e-commerce space, and had the power to topple the entire landscape not only in India but around the world.
“Last night, (they) reached a final agreement and it was decided that Flipkart will be sold to America’s Walmart,” said Son, whose firm happens to be the largest investor in Flipkart, owning about 20% in the homegrown company.
Besides currently operating 21 cash and carry stores in India, Walmart made a dash to acquire several ventures including Jet.com, Shoebuy and Bonobos in the recent past. Its latest acquisition thus pits the veteran brick-and-mortar retailer directly in opposition to arch-rival and global online retailer Amazon, both in India and overseas. The latter has been steadily gaining ground as a trailblazer in the e-commerce and retail industry with just having sealed a deal with Whole Foods.
With Flipkart set to become Walmart, the Indian retailer’s last steps as an independent company may prove to be Walmart’s first steps to redeem its Indian leg of the business reports the Economic Times. According to industry projections, India’s total e-commerce consumption is expected to rise to $3.6 trillion in 2027 from $1.3 trillion in 2016.
Why you should care
India’s “First to a Billion Dollars” startup, Flipkart has come a long way since it inaugurated its online marketplace in 2007, and may prove to be a formidable indigenous ally to Walmart in making waves in the Indian market.
While it marks an exit for founders Sachin and Binny Bansal, Flipkart’s acquisition by Walmart does not mean the company will lose its original identity. Rather, with the addition of a global brand such as Walmart, it will ensure improved quality assurance for consumers who will now expect more global products to make their foray into the Indian market via Walmart-owned Flipkart.
However, this does raise a few concerns. Online sellers on Flipkart are already wary of the operative changes this will certainly bring in its train, especially given its history of killing small businesses to push for its own private labels. “These products would be brought in at hyper-competitive prices, which will cannibalise the market and make it difficult for other sellers to operate. We are studying the situation and will take appropriate action, including the legal route, if necessary,” a spokesperson of the All India Online Vendors’ Association (AIOVA), which has 3,500 sellers on large platforms like Flipkart and Amazon, told the Times of India.
The merger is bound to have a larger impact on both ends of the market spectrum: consumers as well as competitors.