Walmart Inc said it will acquire a majority stake in India’s largest e-retailer Flipkart Ltd. for $16 billion. The deal is expected to transform one of the world’s fastest growing e-commerce markets.
Through the acquisition, the world’s largest retailer—facing competition from Jeff Bezos’ Amazon.com Inc in the U.S.—will take on the world’s largest online retailer in India, experts told BloombergQuint. This will also grant Walmart access to Asia’s third-largest economy where it could not set up brick-and-mortar stores, they said.
Here’s what the deal means for Indian e-commerce and startup ecosystem:
Same Discounts, Longer Wait For Profit
When markets consolidate, price competitiveness starts to reduce and end-consumers stop getting the value that they used to get earlier, according Praveen Sinha, co-founder of Jabong, acquired by Flipkart-owned Myntra in July 2016.
This deal means that the war on pricing and discounting is set to continue, he told BloombergQuint.
The overall ecosystem, that is the sellers and customers, will be in a very beneficial position. That also means the overall time for the e-commerce sector to get profitable will be much more longer than seen in other countries.Praveen Sinha, Co-Founder, Jabong
Meet Indian E-Commerce 2.0
The deal marks the end of the first phase of India’s e-commerce journey and the start of the second phase, according to Ankur Bisen, senior vice-president at Technopak. The first phase was dominated by hyper-competition, extreme growth and the battle for gaining market share at any cost, Bisen told BloombergQuint. This also led to a lot of players betting on “wrong business models”, he said.
In the second phase, we’ll see a lot more focus on business models, integration and scale. And that is good for e-commerce.Ankur Bisen, Senior Vice-President, Technopak
This deal was effectively about “catapulting Walmart into e-commerce leadership in India”, Bisen said.
Amazon Vs The Rest
Walmart is paying a premium to acquire Flipkart as it wants an entry into the Indian market where Amazon already had a strong foothold, according to Satish Meena, senior forecast analyst at Forrester Research.
The hanging sword of Amazon made sure that they paid a little extra to get hold of Flipkart. Its a deal with a heavy premium paid by Walmart for the Indian market.Satish Meena, Research Analyst, Forrester Research
And he expects the Indian e-commerce battle to only intensify further. “I think you will see these companies fighting on the categories in which the market is as of now, and on the strengths of Walmart that include food, grocery and other home furnishing items,” he told BloombergQuint. It would be interesting to see how Flipkart and Walmart combined come out with a competitive product to Amazon Prime which is very popular in India, he said.
Also Read: Walmart’s 21st Century Game
More Choices For Consumers
Customers should not expect a lot of changes in their shopping experience after the deal’s consummation. But they’ll definitely get more to choose from with Walmart’s private labels differentiating the merchandise, according to Adrian Lee, a research director at Gartner. “Flipkart will diversify its inventory to attract more Indian consumer segments that still haven’t started shopping online,” Lee said in an emailed media statement.
One shouldn’t also forget that Jack Ma’s Alibaba Group also intends to become the third player in India, he said.
As consumers are more attuned and comfortable to shopping online, we see vertical specialists (largest categories being fashion, second electronics) benefiting. High value, more discerning consumers who want differentiated choices and unique offers will seek out specialists to fulfill this need.Adrian Lee, Research Director, Gartner