This E-Commerce Entrepreneur Says Walmart Bailed Out Flipkart Investors
Walmart Inc, which will pick up a controlling stake in Flipkart Ltd., has bailed out the big investors of India’s largest online retailer amid intense competition from Amazon.com Inc, according to K Vaitheeswaran, founder of the country’s first e-commerce website Fabmart.com (rebranded Indiaplaza.com).
“For investors it has been a really lucky exit,” Vaitheeswaran told BloombergQuint. “The way Amazon was executing in India, their (Flipkart’s) investment was going down the drain, and in 24 months there would have been no value left, because Amazon would have totally dominated the market.”
The fight for supremacy in the country’s three-way e-commerce war has taken a toll on Flipkart as it vies with cash-rich Amazon and Alibaba-backed Paytm Mall. The e-commerce firm lost what’s equivalent to half of the $6.1 billion it raised from investors since inception a decade ago.
The world’s largest retailer paid $16 billion, including $2 billion equity infusion, to take control of Flipkart. Amazon, the world’s largest e-commerce company, has invested nearly $4 billion in Asia’s third-largest economy and has pledged to keep up the pace of investments in its second-largest market.
What Does This Deal Mean For Walmart?
Flipkart is Walmart’s biggest acquisition after its $10.8 billion purchase in 1999 of British retail chain Asda which it has now agreed to sell to British supermarket chain Sainsbury’s.
The deal with Flipkart makes no commercial sense for Walmart, Vaitheeswaran said.
According to him, Walmart overpaid. Instead they could have followed Amazon’s strategy in India. “Amazon has built a solid business in India in just about four years by investing close to $4 billion. Walmart should have taken a similar stance and launched Walmart.com, and by investing just $4-5 billion in two years they would have at least become a viable No. 2 competition to Amazon, ahead of Flipkart.”
Paying $20 billion makes no sense.K Vaitheeswaran, Founder, Fabmart.com
Amazon, which lost out to Alibaba in China, is challenging Walmart in the U.S. “To say they [Walmart-Flipkart] are going to beat Amazon and Alibaba together in India sounds a bit of a stretch to me,” he said.
Watch the full interview here.