By Prarthana Mitra
Indian e-commerce company Flipkart plans to join hands with global retailing giant Walmart to make a splash in the Indian food sector and make up for ground lost to Amazon in both offline and online retail markets.
In an interview on Monday, chief technology officer of Walmart, Jeremy King said the company will continue its aggressive expansion” in India, however, declined to comment on the ongoing talks with Flipkart.
Food and grocery is the largest retail segment in India but the organised retail of the goods only accounts for less than $10 billion of the $600 billion market.
According to media reports, executives familiar with the plans have said a significant portion of Walmart’s proposed investment in Flipkart will be used to build infrastructure including food parks, cold chain, collection centres, sorting and grading facilities, centres for food excellence and allied facilities. This is in keeping with the corporation’s global strategy to focus on food retail for future growth.
Booming food retail market in India
Walmart seems to be following in the footsteps of US rival Amazon, which received government approval last year to sell locally produced and packaged food merchandise through its offline and online channels.
Amazon’s acquisition of Whole Foods in the US last year for $13.7bn, pits Walmart against serious competition even on a global scale. Besides Amazon Pantry services already operative in major Indian cities, Amazon India Retail Pvt Ltd, a fully-owned subsidiary has been trading food items online in Pune on a pilot basis. Amazon is also keen on establishing an offline presence and is in talks with the food giant Future Group for collaboration.
Also Read: Walmart to be the saviour of Flipkart: The giant to finally make its mark on the Indian retail market
Flipkart’s database with Walmart’s infrastructure
A spokesperson from Walmart India confirmed that food is a crucial component of the company’s wholesale cash-and-carry business in India, accounting for around 60-65% of the annual sales. The spokesperson added in an email the company is hopeful that with a more structured growth, the cash-and-carry business will able to provide a greater impetus to the country’s farmers by increasing their income.
Experts said that with Flipkart’s consumer database, Walmart could effectively push low-priced grocery items. The company would need to build warehouses in cities and deliver food and grocery online without setting up any stores at the outset.
Industry experts have predicted that the valuation of Flipkart could increase to $20 billion from its current valuation of $11.6 billion if the deal goes through. Media reports claim Walmart plans to invest around $7 billion into the company and also purchase stake from existing shareholders such as SoftBank and Tiger Global. Currently, SoftBank is the largest shareholder in Flipkart with a 23.6% stake followed by Tiger Global with 20.5%. Founders Binny and Sachin Bansal hold around 10%.
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