The Amazon Vs Flipkart battle in the online retail space could be taken to another level if the talks currently on between Flipkart and Walmart Stores Inc goes through. These talks are aimed at Flipkart selling a significant minority stake (10-15%) to the US retail giant and reports indicate this may happen as early as March this year.
Doug McMillon, CEO of Walmart reportedly led a high-powered team to the Bangalore headquarters of Flipkart and these talks are at an advanced stage. The others accompanying him included Walmart e-commerce CEO Marc Lore and Judith McKenna. The latter is currently the CEO of Walmart and is taking over as the CEO of Walmart International. The company though has declined to acknowledge the development, limiting its comments to say the team is undertaking a review of the cash and carry business, global technology centre and global sourcing operations of Walmart already functioning in India.
If the talks indeed fructify Walmart could end up picking up around 15 to 20% stake in Flipkart and the ones off-loading the stakes would be some long-standing investors, via primary and secondary devolution of their holdings.
The online retail space, particularly in the grocery and household articles, is undergoing the kind of churning possibly not witnessed before. In the US, the Chinese giant Alibaba is trying to make an entry into the grocery segment by entering into an arrangement with Krogers there. Walmart has already acquired Whole Foods that has added 400-odd stores to its network.
Walmart followed it up with the taking over of Jet.com for which it spent $3 billion. Again, it went on an acquisition spree gaining control over 15 startups in order to strengthen its fortress and sharpening the competition with Amazon.
As far as the Indian market is concerned, Amazon has already make public its intention to make an investment of $5 billion and has progressed in doing so. Similarly, Flipkart has already made huge investments as well. It is under these circumstances that Walmart would be taking these steps to make its presence felt directly in an ecommerce platform.
It is also being pointed by people in the know that the association with Walmart will benefit Flipkart, particularly, through the Jet.com connection. Walmart itself is said to have achieved an increase in online turnover by over 50% after its acquisition of Jet.com mainly due to the pricing leverage Jet.com enjoys and it may ultimately benefit Flipkart while taking on Amazon.
While at a broader level, this joining up of forces with Walmart and Flipkart could prove to be very beneficial for both the companies, the grocery business itself could throw a lot of challenges as it is a business with low margins and the strategic handling of last-mile deliveries by large organizations has always been known to be testing their systems to the full.