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What Does the Walmart-Flipkart Agreement Mean for India

<img class="wp-image-154402 size-full" src="https://www.practicalecommerce.com/wp-content/uploads/2018/06/Walmart-Flipkart.jpg" alt=" The recent acquisition by Walmart of a majority stake in Flipkart, the gigantic Indian market, will likely reshape e-commerce in this country. Protesters include small businesses and unions. "Width =" 800 "height =" 383 "/>

The recent acquisition by Walmart of a majority stake in Flipkart, the gigantic Indian market, is likely to reshape e-commerce in this country. small businesses and unions.

The Indian e-commerce market is growing rapidly thanks to the penetration of smartphones and the fast internet. Overall e – commerce revenue in India is expected to reach $ 64 billion by 2020, up from $ 38.5 billion in 2017, an increase of about 66%. This is according to the India Brand Equity Foundation, a partnership trust of the Indian government and private companies. IBEF predicts that e-commerce sales in India will surpass the United States by 2034, becoming the second largest e-commerce market in the world. (In comparison, US e-commerce retail sales in 2017 were about 409 billion US dollars.)

Apart from fashion and consumer electronics, segments experiencing rapid growth in online sales in India include furniture, groceries, personal and beauty products, and delivery of food. The growing number of Generation Y members – consumers who reach adulthood in the 2000s – rapid urbanization and the improvement of the economy are also crucial factors that influence this trend.

Enter Walmart

The recent acquisition by Walmart (for around 16 billion US dollars) of 77% of Flipkart, the giant Indian market, will likely benefit Flipkart and consumers alike. Flipkart does not have expertise in logistics and supply chain management, which is a strength of Walmart.

Walmart, on the other hand, will benefit from the rapid growth of e-commerce in India and the Flipkart market model. For Indian consumers, all of this will likely result in lower prices and more products.

India 's foreign direct investment regulations will not allow the US retailer to sell brands from other countries. Instead, Walmart will have to sell the locally purchased items.

Amazon is the second largest e-commerce company in India with 31 percent market share. Flipkart, combined with its fashion subsidiaries Myntra and Jabong, has a 39.5% share. Amazon has more products listed on its platform and more exclusive offers. It also offers better prices.

To compete with Amazon, which has promised to invest $ 5 billion in its Indian operations, Walmart will likely develop a reliable storage, inventory and logistics network in the country. The improvement of the supply chain is expected to generate more employment opportunities and better access to cold storage technology for grocery products, which support farmers and small businesses. grocery stores. The agreement could thus boost Indian agriculture and infrastructure.

The agreement is also a vote of confidence in the Indian tech startup ecosystem – Flipkart was launched in 2007 by two former employees of Amazon – proving that India can attract foreign investors.

American duopoly?

The agreement, however, is not universally supported in India. The protesters include nationalist political factions, small traders' unions, labor unions and farmers. An example is Swadeshi Jagran Manch, a nationalist group linked to Rashtriya Swayamsevak Sangh, the ideological parent of Prime Minister Narendra Modi's party. The protesters call this deal a move against the interests of India because they will lead to a kind of duopoly of two American companies, Amazon and Walmart.

More than 100 groups of small traders, farmers and workers came together to oppose the deal. According to the protesters, the predatory pricing and steep discount model for which Walmart is famous will eventually force local retailers and retailers to close. Another concern is the increase in unemployment. Protesters fear that the collapse of small retailers in the country will create fewer net jobs.

However, Walmart quickly rejected these claims. In fact, Rajneesh Kumar, head of corporate affairs at Walmart India, said the Walmart-Flipkart alliance will help modernize small grocery stores – the "Kirana stores" – and thus create jobs.

"We [Walmart] have cash and doing business in India for almost a decade now, helping small Kirana stores succeed and become modern." We supply locally, with over 95% of our goods from the country, including thousands of small farmers, small suppliers and women-owned businesses, "he added.

Regardless, the agreement put the Modi government in a tight political stance.

Reorganization of Electronic Commerce

In short, Indian consumers and the Indian tech ecosystem are excited about the deal. But small traders, farmers and unions are strongly opposed. With time, the agreement will reshape e-commerce in India for good despite nationalist rhetoric.

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