Group-1

WALMART–FLIPKART
DEAL:
IN SEARCH OF STABILITY
INTRODUCTION:

Walmart paid $16 billion buying a 77% share in Flipkart in 2018, aiming
to counter Amazon's expanding dominance in India's e-commerce
business. However, Flipkart encountered issues such as dwindling
market share and strict FDI regulations. In 2019, Reliance entered the
market with JioMart, increasing competition. Despite these challenges
and the impact of the COVID-19 pandemic, Flipkart planned to recoup
after the lockdown. The success of Walmart's investment in Flipkart
was dependent on its ability to overcome these hurdles and emerge as
a top e-commerce company in India, despite tough competition and
an evolving regulatory framework.
 E-COMMERCE IN INDIA: GROWTH AND CHALLENGES
The Indian e-commerce business grew rapidly, hitting $38 billion
in 2017 and expected to reach $200 billion by 2026, thanks to
variables such as discounts, delivery infrastructure, and
smartphone usage.

Despite tremendous development, India's online retail

reachability rate was relatively low at 5%, compared to
countries like China (20%) and the United States (12%), with
online penetration varies by industry, such as 17% for
consumer electronics and 0.1% for food and groceries.
 THE RISE OF AMAZON IN INDIAN E-COMMERCE
Amazon joined the Indian e-commerce sector in 2013, investing
around $10 billion by 2018 and allocating at least $1 billion per
year for programs such as Prime Video upgrades, with the goal
of capitalising on the development potential of developing
nations like India.

By 2018, Amazon had secured the second spot in India's e-

commerce industry, thanks to its efficient fulfillment and
logistics networks, affordable pricing strategy, and digital
offerings such as Amazon Music and Prime Video, which
contributed to higher seller onboarding rates and customer
trust, establishing it as a comprehensive online shopping
destination.
 THE GROWTH OF FLIPKART: OPPORTUNITIES AND CHALLENGES
Binny Bansal and Sachin Bansal launched Flipkart in 2007, with an initial
concentration on book sales before expanding into fashion, consumer
electronics, and other areas. It strengthened its dominance in the garment
industry by acquiring Myntra and Jabong.com and launching in-house brands
such as DigiFlip, Citron, and Flippd. In 2017, several new brands were
introduced, including MarQ, Smartbuy, and Billion. Flipkart also owns the
mobile payment platform PhonePe and has a customer support team. In July
2019, it inaugurated its first furniture experience centre in Bengaluru, with
the goal of establishing an omnichannel marketplace. Flipkart partnered with
Google and integrated Google Lens technology to improve the viewing
experience at the centres. In June 2020, Flipkart's food segment developed a
voice assistant in Hindi and English to promote quick product discovery and
improve personal shopping experience
1. Technology for Supply Chain Management:
Flipkart's inbound logistics depended on suppliers shipping
goods to its seven large warehouses across India. When the
products arrived, they were inspected for quality, scanned, and
inventoried using IT systems. Accurate forecasting reduces
returns, resulting in more efficient delivery and more customer
satisfaction.

Orders were fulfilled using just-in-time manufacture or inventory

purchase, depending on product availability. If orders were not
accessible locally, they were fulfilled by the nearest warehouses
or local dealers. Free returns within 30 days increased the client
base. Inventory was restocked when it reached reorder points.
 Flipkart drew customers through discounts, price reduction
strategies, and suggested product combinations. Free
delivery was made possible by interactive freight
calculations for single transactions. Marketing campaigns
such as the Big Billion Days increased revenue.

2.Acquisitions by Flipkart:
Flipkart strategically bought platforms like weRead and Chakpak
Media for book and film-related content, respectively, to broaden
its client base and services. Taking complete ownership of Myntra
and integrating PhonePe improved its position in fashion and
digital payments. Flipkart's acquisitions established it as a
comprehensive destination for books, fashion, and digital
services.
FLIPKART’S CHALLENGES:

Flipkart's revenue increased from less than $1 million in fiscal

year 2008-09 to about $3 billion in fiscal year 2016-17, while
growth slowed to 29% from 50% the previous year. With a net
margin of -44% in FY 2016-17 due to a $1.3 billion loss,
aggressive pricing and reductions driven by industry
competitiveness resulted in considerable losses.

To compete with offline stores, Flipkart sought support from a

retail behemoth with expertise in cost reduction, logistics, and
supply chain management.
THE GROWTH OF WALMART: OPPORTUNITIES AND CHALLENGES:
Sam Walton founded Walmart in 1962, and it became a publicly
traded firm in the United States in 1969. It entered the Indian
market in 2007 and established Walmart India in 2009. Walmart
India, a wholly-owned subsidiary of Walmart Inc., operated 28
Best Price Modern Wholesale Stores and a fulfilment centre in
nine states. It had a membership-based concept and served over 1
million members, offering a wide range of goods and services such
as electronics, consumables, clothes, and home appliances.
Additionally, Walmart Labs in Bangalore acted as a technological
and global sourcing hub.
1. Technology for Supply Chain:
Walmart maintained effective inbound logistics by
establishing a code of behaviour for suppliers, cultivating
long-term partnerships, obtaining bulk purchases, and passing
on cost savings to customers. Its "cross-docking" supply chain
technique reduced transportation and inventory expenses,
allowing for a goods replenishment cycle of 48 hours.
Operating under the tagline "Save money. Live better,"
Walmart's pricing strategy of "everyday low prices" set it apart
from competitors and strengthened its marketing strategy. It
used traditional and digital advertising channels, social media,
and promotional videos to increase brand visibility.
 Customer service was an important part of Walmart's strategy,
helping to build a strong brand image and customer awareness
while emphasising the company's dedication to providing
consumers with value and convenience.
2. Acquisitions by Walmart:
Walmart expanded its global reach in the late 1990s and early
2000s, effectively establishing operations in Canada by
acquiring Woolworth Canada locations and launching
Supercentres. However, its 1997 foray into the German market
was unsuccessful, resulting in its withdrawal in 2006 due to
prolonged losses. Similarly, Walmart's 1999 acquisition of Asda
in the United Kingdom did not result in large expansion as
expected.
In 2007, Walmart entered India in a joint venture with
Bharti Airtel Limited to open cash-and-carry superstores
under the name "Best Price Modern Wholesale." Despite
initially establishing 20 superstores, cultural conflicts and
collaboration issues led to the partnership's demise in
2013. Walmart continues to operate its superstores
independently, relying on its supplier-development
system and direct farm program to generate shareholder
returns and sustain investments.
3. Challenges from Amazon:

In 2017, Walmart's revenue surpassed $500 billion, with a net

income of $20 billion, while Amazon's net sales were $177.9
billion and its net income was $3 billion. Despite weaker
financial data, Amazon's market value of $780 billion in 2018
overtook Walmart's $250 billion, indicating investor
confidence in its growth potential and dominance in online
retail, despite Walmart's e-commerce attempts, including
the unsuccessful acquisition of Jet.com.
 WALMART–FLIPKART DEAL

FLIPKART’S ACQUISITION BY WALMART :

In May 2018, Walmart paid $16 billion for a 77% holding in
Flipkart, forcing several Flipkart investors to quit, including co-
founder Sachin Bansal, who sold his 5.5% stake for $1 billion.
Binny Bansal, co-founder and CEO of Walmart's Flipkart Group,
resigned later this year owing to personal misconduct charges.
Walmart increased its stake in Flipkart to 81.3% with the goal of
using technology to help Flipkart achieve its customer-focused
purpose in Indian e-commerce. Walmart and Flipkart announced
significant supply chain investments to bolster backend
operations, particularly in the food and grocery sector, where
Flipkart made a strategic investment in agriculture technology
company Ninjacart in December 2019.
Flipkart purchased Shadowfax Technologies to strengthen its
supply chain and to use Walmart's warehouses for its FarmerMart
program, which would boost fresh produce delivery to modern
retail stores and local shops. These expenditures and technology
advances seek to address logistical difficulties, expand demand
capacity, and, eventually, drive Flipkart's profitability.
GOVERNMENT POLICIES AND FOREIGN DIRECT INVESTMENT NORMS:
The Indian government issued new FDI guidelines for e-
commerce in December 2018, forbidding corporations from
selling products exclusively on their platforms as well as special
treatment, significant discounts, and pricing manipulation. These
rules were designed to address complaints about violations of
guidelines while also protecting brick-and-mortar shops from
long-term damage caused by significant discounts.
The stricter FDI requirements presented issues for e-commerce
giants such as Flipkart and Amazon, affecting brand launches,
exclusive discounts, cashbacks, and preferential services such as
Flipkart Plus and Amazon Prime.
Walmart, which had invested in Flipkart, experienced challenges
when it was no longer permitted to substantially sell its inventory
on Flipkart's platform due to new laws, impeding its strategy of
leveraging low-cost rates to attract customers.

To comply with FDI regulations, Amazon lowered its ownership in

companies selling products on its site, deleted products from
sellers with significant equity investments, and made changes to
product listings. According to financial services industry'
predictions, this regulatory change could result in considerable
revenue losses for both Flipkart and Amazon by 2020.
RELIANCE’S ENTRY:
In January 2019, Reliance announced intentions to establish the
world's largest online-to-offline e-commerce platform, drawing
on its enormous offline retail network of over 10,000 outlets and
300 million Jio users. This move aims to disrupt the Indian e-
commerce market by expanding to 5 million digital retail
locations by 2023.
Reliance's history of big reductions, as evidenced by previous
pricing plan announcements, suggested potential difficulties for
competitors such as the Walmart-Flipkart combo and Amazon.
This discounted method has the potential to disrupt industries,
similar to how it affected the telecoms business.
 Reliance's entry into the e-commerce market, combined
with changes in FDI regulation, heightened the competitive
landscape and might put pressure on Flipkart's financials
and operations. In extreme situations, this scenario could
result in Walmart's exit from Flipkart, underscoring the
significance of Reliance's entry into the e-commerce
business.
COVID-19 CRISIS:
The COVID-19 pandemic began in February 2020, resulting in
statewide lockdowns in India, posing obstacles for the e-
commerce industry such as limited staff availability and a roughly
two-month prohibition on non-essential item sales. Due to social
distancing measures, e-commerce platforms experienced a shift
in consumer behaviour toward online purchases of critical
commodities, particularly groceries
The grocery market of e-commerce, which includes companies
such as Grofers India Pvt. Ltd. and Amazon India, has grown
significantly as consumers prefer online shopping to escape
crowds during the epidemic. Despite the growing demand for
online grocery shopping, Flipkart was unable to enter the food
retail market due to regulatory concerns.
In response to the surge in demand following COVID-19,
Walmart and Flipkart aimed to improve the customer
experience by expanding their presence in major cities,
forming partnerships with FMCG companies and brick-and-
mortar retailers, and transforming warehouses to store
essential products. Partnerships with Spencer's Retail
Limited and Vishal Mega Mart Pvt. Ltd. were formed to
supply a broader choice of basic commodities and assure
quick doorstep delivery to customers.
THE WALMART–FLIPKART DUO: THE WAY FORWARD?:

Despite hurdles such as changes in FDI norms, competition from

Amazon and Reliance, and the impact of the COVID-19 pandemic,
the Walmart-Flipkart partnership had to adapt and modify. The
outcome remained uncertain as they worked through these
challenges to establish themselves in the Indian e-commerce
business.
Thank You