In May 2018, the world’s largest retailer, Walmart, acquired Indian e-commerce giant, Flipkart for $16 billion and a 77% stake. Walmart and Flipkart will remain separate brands with the goal of transitioning Flipkart to a publicly-listed, majority-owned subsidiary in the future.
The acquisition is Walmart’s biggest deal ever and also one of the most successful exits by an Indian startup. The acquisition of the leading homegrown player, e-commerce in India will now be dominated by two foreign players—Amazon and Walmart.
Why Flipkart was acquired by Walmart?
According to Morgan Stanley, India's online retail market would expand to $200 billion by 2026, up from $15 billion in 2016. The average pay is increasing by 2% each year, and internet usage is increasing as data costs become more competitive, making the Indian e-commerce market more viable.
Flipkart has the largest market share in e-commerce, so Walmart wanted to achieve the next leg of growth in India with the help of this acquisition, thanks to Flipkart's 175 million registered users.
In India, 100 percent foreign direct investment (FDI) is allowed in single-brand retail. Walmart is a multi-brand retail chain, 100 percent FDI
is not legal, so it focuses solely on cash and carry operations.
India impoverished as Flipkart the e-commerce Kohinoor from the digital colony was sold.
India had banned FDI in online retail. It was an outdated policy but it was the law. The Bansal boys knew if the ownership remained 'Indian' they would've to rig a new ruse everyday to dodge the bureaucrats. So in 2011, they flipped the shareholding into a new Singapore company called Flipkart Pt Ltd. Indian government has virtually forced the Bansal boys to sell their dream for a relatively paltry $21 billion. The American and Chinese governments have abetted Jeff, Mark, Jack and Pony to continue to controlling their ambitions in hot pursuit of a trillion dollars of value.
If Indian policy makers had taken a different track-
1. Allowed Flipkart to have special controlling rights/votes on their
equity.
2. Allowed them to list on NASDAQ without insisting on an Indian IPO.
3. Not outlawed them, from India, forcing them to migrate to Singapore.
4. Not threatened them to criminal prosecution for doing a terrific job.
5. Created a globally benchmarked architecture of e-commerce in India.
If all of this had been done Flipkarts founders would today have been in substantial control of their brave enterprise. Their eyes would be fastened on creating a half a trillion dollar company by 2025. And their names may have been taken in same breath as Jeff, Mark, Jack and Pony.
Alas! It was not to be.
Benefit to Walmart?
PhonePe's impact cannot be emphasised enough. It was started under Flipkart as one of its subsidiaries but today PhonePe has turned out to be the unexpected unicorn. It went from one of a subsidiary to one of the biggest players again in the Indian market close to 8-10 billion dollar and it's become to compete with Paytm as a platform of financial transactions. Flipkart to Walmart was a perfect fit for it to take over.
Not only the purchase of Flipkart but under it is a company which has grown that much making sure that Walmart's investment into Flipkart and India has both been completely worth it for them. It is like a cherry on the cake for Walmart. Through this Flipkart-Walmart deal, Walmart will leverage e-commerce market presence of Flipkart in the country with an active base of 54 million customers.
Benefits to Flipkart?
This deal helped Flipkart leverage Walmart's omnichannel retail skill and comprehensive supply chain information.
This transaction benefited Flipkart not only in terms of revenues, but also in terms of expanding its market beyond fashion and smartphones.
Amazon received approval to operate in grocery and perishable food goods in 2017, while Flipkart lagged behind. Flipkart is now refurnishing its system with the help of this transaction, which includes Walmart's expertise in running offline stores, access to manufacturers and sellers, supply chain, and a chance to join the grocery industry.
How is it a win for Indians?
Walmart has finally succeeded in penetrating the Indian market after more than 15 years of attempting. The Indian e-commerce sector was
formerly controlled by two companies: Amazon and Flipkart, but the Walmart-Flipkart deal changed that.
Not only is Flipkart expanding, but we now have another giant teaching a firm like Flipkart things that it could not have learned on its own. Walmart is a major, relatively older firm that has brought us more efficiency, better prices, and more convenience. It eliminates the element of visiting to stores for sales and provided us with COD, return, exchange, refund, or paying with credit, which provides us with a great deal of convenience.
For everyone involved in this transaction, it's a WIN-WIN-WIN situation.
Investors
Today, the major investors in Flipkart besides Walmart are Tiger Global, Tencent and Microsoft. Earlier the CEO of Flipkart was Sachin Bansal and in 2016 he became the CEO of Flipkart Group. Kalyan Krishnamurthy became the CEO of Flipkart which is the situation today. Sachin Bansal stepped down while Binny Bansal is still running it. These 2 boys who lived in Chandigarh, worked at Amazon, started Flipkart in 2007 are worth over 1 billion dollars today.
Road Ahead
We hear so much about Amazon, Flipkart and believe that e-commerce has grown dramatically, we can say 4% of the entire retail market is online, rest 96% is still transacted offline but that means there is so much of a potential for them to grow.
From these 4% - 40% is Flipkart and 30-35% is Amazon, rest other smaller companies.
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