This move is part of an overall strategy by Flipkart to build its supply chain infrastructure to take on Amazon and Reliance.

Atom M&A Friday, January 24, 2020 - 20:12

First, Walmart acquired Flipkart and now Flipkart is set to reverse acquire Walmart’s wholesale (B2B) business in India. This move is part of an overall strategy by Flipkart to build its supply chain infrastructure to take on Amazon and Reliance in the race for the B2B segment in the categories like groceries and fresh foods. The model almost all three are trying to adopt is to make purchases directly from the farmers and supply to the retail stores. In the bargain, these companies are aiming to enrol the retailers and kirana stores to handle their last mile delivery efforts for their online customers located in the respective areas.

Walmart had entered India with its Best Price cash & carry business since the FDI rules permitted 100% foreign direct investment in the B2B segment. It has set up 28 Best Price wholesale stores to handle this business. Its customers include hotels and other bulk customers of grocery and fresh foods.

Flipkart has entered the same segment in the retail also now that the FDI norms permit 100% FDI in food retail. All three, Amazon, Reliance and Flipkart are working on an omnichannel model to capture the vast Indian market for this category. While Reliance has been present in offline retail through its Reliance Fresh stores and is trying to integrate it with the online foray through its digital arm, Amazon has made investments in Big Bazaar, More supermarket etc. to get a hold on offline retail.

Walmart and Flipkart have their own strategy for the grocery and food business and the acquisition of the Best Price wholesale stores will strengthen its efforts at building the business from scratch. The investments in Ninjacart and Shadowfax by Flipkart too gel with this larger plan.

Ultimately, the aim is to cover the hyperlocal delivery which is the most challenging part in this trade. The gap between the placement of orders and deliveries has to be shrunk to make it popular among the customers, whether it is the end consumers or kirana stores.

Observers also see this as a positive move by Flipkart.