The $40 billion Indian e-commerce market is going through a big churn with big-ticket mergers and acquisitions in the offing. US-based Walmart scooping up home-grown Flipkart run by Sachin Bansal and Binny Bansal will change the face of the e-commerce business in India. The upshot of that is that Amazon’s virtual monopoly in several global markets and India will possibly end with Walmart’s entry into the e-commerce space. Given that over $15 billion may have to be forked out to corner 75 per cent equity in Flipkart, Walmart is emerging as a big boy in the e-business – its revenues for 2018 are $500 billion.
If regulatory approvals come through and Walmart becomes the largest equity holder in Flipkart, duopoly in Indian e-commerce will set in and there would be space for at least two more large players. With competition, the Indian e-commerce space will experience a huge trickle down effect and also bring in price competitiveness, improve quality of services and phase out fake products’ delivery that has been rampant especially in semi-urban and rural markets. Consumer experience will only be enhanced with genuine competition.
A great opportunity now awaits India to leverage its position as a major location for e-commerce. Apart from being a backyard for sourcing, aggregation and distribution of products and services, India has the wherewithal and depth to groom more such enterprises. The success of Sachin Bansal and Binny Bansals in whipping up a successful start-up and catapulting it into a $20 billion enterprise sets the stage for more such stories. The former IIT-ians set up shop in October 2007 after quitting Amazon. Flipkart evolved into a conglomerate with over 30,000 employees and posted Rs 18,857 crore in annual revenues in 2017. Japanese banks and US companies have jostled for a slice of the pie in Flipkart’s ever-expanding business. Tenscent, eBay, Accel, Naspers, Tiger Global and Iconique have become part of the Flipkart business.
Various independent estimates that have projected India to become the second largest e-commerce market after the US by 2025 with business potential of over $250 billion may have propelled Walmart to commit huge funds on Flipkart. Also, with internet penetration and data services boom in India, this market may turn an online stores paradise.
Achieving synergies between physical stores format and e-commerce business via Flipkart will provide huge heft to Walmart that Amazon may not have now. An integrated model – physical retail businesses and e-commerce – may be the way going forward and hence it is important to see how the Walmart-Flipkart tango picks up pace.
Now that there is a workable and profitable Flipkart model, this should serve as the template for building a start-up eco-system that the Narendra Modi government is seeking to evolve across sectors. From fintech companies to tax aggregation, the start-ups will have to be groomed and nourished to turn India an e-way hub. Finally, if the Walmart-Flipkart deal were to be sealed, it would lay the foundation for not only serious e-commerce where 100 per cent foreign direct investment is allowed, even foreign start-ups could get a boost.