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Walmart Adds To Cart

0507_Walmart

Image source: William Howard / Shutterstock.com

What's going on?

On Friday, a group led by US retail behemoth Walmart announced that it’s set to acquire Indian online retailer Flipkart in a deal worth $15 billion.

What does this mean?

Flipkart had offers on the shelf from both Walmart and Amazon – but it’s chosen to forgo “The Everything Store” and sell 75% of itself to Walmart and a group of investors (including Google’s parent company, Alphabet).


Flipkart was founded in 2010 by two former Amazon employees. The company sells almost everything (a bit like Amazon) – from furniture to electronics and socks. The deal offers Walmart access to a high-growth emerging market at a time when emerging markets seem to be out of favor with investors.

Why should I care?

For markets: Walmart and Amazon are taking the fight to India.


Walmart and Amazon are going toe-to-toe in the battle for consumers’ wallets: Amazon’s growing empire already includes India where it has spent $5.5 billion so far on building out its Prime memberships and local streaming video content – and it’s vowed to keep that pace up. Flipkart aside, Walmart’s initial foray into India was slowed by regulations blocking foreign companies from selling products directly to consumers (Amazon gets around this by using its marketplace to let Indian companies sell directly to Indian customers), so instead, Walmart opened a number of wholesale stores (i.e. it’s selling its goods to retailers that then sell on to consumers).



The bigger picture: Global dominance includes India.


India is a large consumer market, representing some $800 billion of retail sales and high growth potential since a relatively small share of all sales in India happen online. It stands to reason, then, that the two retail giants want to develop a foothold in the market. Walmart’s in the process of selling its UK grocery chain Asda to competitor Sainsbury’s – it likely hopes that its new Indian investment will be a better use of those funds than a challenging UK grocery market.

Originally posted as part of the Finimize daily email.

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