Flipkart Walmart Deal – Impact on Indian E commerce Market

Indian E-commerce Market

The current valuation of the size of the Indian economy comes at around $2.5 trillion. The World Bank predicts that India will grow at a rate of 7.9% this year, the fastest in all Asian economies, which includes China. The above talked about factors make India a very gleaming avenue for startups. Just last year, around 1000 new tech startups were added to our already large startup base, making us the world’s third-largest startup economy. Out of these many were e-commerce startups. Currently, the size of this newly emerged, internet propelled industry is close to $50 billion and is expected to cross $200 billion by 2025.

Currently, India is the third largest online retail market in the world after China and the USA, and the scenario of the last 5 years has helped it grow a lot. The market, which had only about 100+ big names has certainly grown a lot, with more than 900 major players who are currently operating in this market in India. The government initiatives such as Make In India and StartUp India have definitely played a pivot’s role in such a high paced growth of this market. The market, which had only two major players at that time, Indian origin brand Flipkart and American giant Amazon, is now filled up with other players such as Snapdeal, PayTm and PayTm Mall, not to mention the other giants in its subcategories such as fashion, food delivery, grocery, furniture and others, which have seen players like Jabong, Myntra, Grofers, Pepperfry, and Swiggy among others rise to glory. Thus, with the increased number of big-time players in this market, the competition among them is fierce, which makes it a good thing for the consumers, who are bound to get a better service.

Today, while there are a lot of big names which have set up their shop online, the biggest two, namely Flipkart and Amazon are still at the same place where they were 5 years ago, and that is at the top. While brands such as Snapdeal sold off their businesses and eBay and Alibaba still trying to find a foothold in the Indian markets, these two competitors certainly have had the first mover’s advantage. Amazon being the big bully of the internet retail industry around the whole world has faced stiff competition from India’s answer to online retail business, Flipkart, who is valued at around $20 billion presently. Even though its valuation is nowhere near the valuation of Amazon, or the figure that its co-founder Sachin Bansal had predicted after the next 5 years in 2013(a whopping $100 billion), it has still survived and fought neck to neck with the American giant Amazon. In this turbulent and competitive period, there have been a lot of times when everyone questioned the future of the Indian brand and a lot of rumors which talked about Amazon’s plans for its acquisition, but these questions and rumors were always shrugged away. Both the companies, despite nothing but losses to show for, went on and kept on spreading its roots in the Indian market.

Flipkart – Walmart Deal

Recently, a strong report is linking the Indian e-commerce giant to Walmart, an American supermarket chain with a mammoth valuation of $500 billion, 25 times more than Flipkart. The report talks about a possible acquisition of Flipkart by the American giant, who is looking to sprout its wings in the Indian internet retail business. According to the report, Flipkart’s major shareholders, Tiger Global Management, and its Japanese shareholders SoftBank Group are looking at this deal with glittering eyes. Reportedly, Walmart is looking to buy a total stake of anywhere between 51% to 86% in Flipkart and has valued it at $20 billion.

Another major twist in the tale is that Alphabet, the parent company of Google, is also vying to buy a minority stake in this deal. It is also being said that Amazon had also submitted its offer to buy Flipkart, but that bid was duly rejected. There is a lot of speculation about this deal, and as one would have it, the Flipkart-Walmart deal might just go through. It will be a big and defining step in the future of the Indian e-commerce industry, which is currently a hot destination for all the big kingpins of the world.

Most Indians, however, will see this as a disappointment, and will justifiable reasons. It means that another of India’s promising businesses, from whom a lot was expected has finally given itself up at the hands of a foreign multinational corporation. Indians, who leave no chance to tell everyone how they are proud to be an Indian will surely find this a tough pill to digest. A lot was expected from Flipkart, not just by India but by the whole world.

It is also a bad news for every other firm who is operating in this line in India, including Amazon, who hasn’t earned a single penny from India. If this deal goes through, Amazon will be pipped against the combined might of Walmart and Alphabet, who are surely better competitors than the current players in India. Walmart has already proved to be Amazon’s biggest and probably the only competitor in the American markets, and the Indian market is a no different battleground.

This also means that the online retail industry in India will be completely dependent on foreign multinational corporations, who in no way will let any new domestic player pop up. This American oligopoly will prove dangerous for our domestic retail shop owners too, as these MNCs are known to gobble up any kind of competition that comes their way, be it big or small, and a highly dependent customer base is exactly what they need for their future endeavors.

The Indian e-commerce market has certainly not achieved what everyone thought it would in terms of its size, but it still is the third largest market in the world on whom everyone wants to capitalize upon. The future years for it will be full of turbulence, and there are a lot of twists and turns awaiting its players.

Team

RG Consultants