SHARE

facebook icon facebook icon

As the Walmart-Flipkart-Amazon deal continues to excite the media no end, according to reports from Bloomberg and The Wall Street Journal, it is most likely that Flipkart has chosen Walmart over Amazon.

According to the reports, Flipkart has agreed to a 75% stake to be bought by Walmart, a deal amounting to about $15 billion. None of the players have agreed to comment though, so it is still speculation, albeit with high chances for Walmart being the chosen one. According to Reuters, the deal has still not gotten through, and it could still swing either way. Reuters also claims to information that some concerns such as taxation etc. are still being discussed.

Reports also say that Flipkart’s top investor Japanese company SoftBank will sell its 20% stake at a value of approximately $20 billion. It is also speculated that Google’s parent company Alphabet Inc. might be in on the investment with Walmart. The final conclusion is expected within ten days.

If the deal goes through, Walmart would have access to an e-commerce market of no less than 1.3 billion. Only the largest retail company of the world, Walmart has been battling Amazon’s online presence. This deal is Walmart’s triumph, as it is Amazon’s defeat after losing China’s market to Alibaba Group Holding Ltd.


Amazon or Walmart, Who Will Flipkart Choose?


Amazon has been in stiff competition with Flipkart for Indian online retail space. With Flipkart’s mega-success in mobile phones and fashion, Amazon has not been able to overtake the market in India. Amazon has been struggling against Flipkart’s low prices and local reach in India and has recently cut down prices on mobile phones, while offering more choices on its website.

Jeff Bezos, Amazon founder, has reportedly fed an amount of $5.5 billion to increase Amazon’s presence in India. Amazon India chief Amit Agarwal has also revamped the site to make it more appealing to Indians.

Amazon has also been vying for a stake in Flipkart, with a hefty break-up fee of around $2 billion on offer, since Walmart’s entry would mean a much greater rival in the Indian online retail playing field. However, a deal with Amazon has more regulatory complications since it already has an entry in the Indian market.

According to experts, a Flipkart-Amazon alliance will be subject to scrutiny by the Competition Commission of India (CCI), since the deal will exceed revenues amounting to INR 6,000 crore or with assets amounting to INR 2,000 crore. This could mean that even after an alliance, they would have to operate as separate brands. As such, according to Reuters, Amazon has been seeking legal advice regarding the same.

Moreover, Walmart can provide solid financial support for Flipkart, which, despite having a higher GMV (Gross Merchandise Value) than Amazon, has been in loss constantly. Keeping these factors in mind, it is most likely that Flipkart has chosen Walmart over Amazon, unless there is an unforeseen issue.

As part of the deal, Flipkart’s major stakeholders, such as Tencent Holdings Ltd., South Africa’s Naspers Ltd. and Microsoft Corp, are likely to hold smaller parts of the entity.

After US and China, the Indian market holds a lot of promise for online retail in the future, what with IoT disrupting the way people live almost every month.

“Flipkart is key to a global e-commerce strategy,” Bloomberg quoted Arvind Singhal, chairman of the New Delhi-based retail consultancy Technopak Advisors. “Walmart clearly doesn’t want to be left behind in the race as India is a critical piece.”

Meanwhile, last month, Walmart agreed to merge its UK grocery chain with British retailer Sainsbury, while retaining a 42% stake in the combined entity. The move is being seen as Walmart’s global strategy to prioritize faster-growing markets over established ones.

SHARE

facebook icon facebook icon
You may also like