What the Walmart-flip­kart deal means for in­dia?

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Walmart ac­quired a 77% stake in Flip­kart for a mas­sive $16 bil­lion. The Flip­kart ac­qui­si­tion, on the back of its ear­lier Jet.com ac­qui­si­tion, sig­ni­fies the new ag­gres­sive at­ti­tude of Walmart as it com­petes against Ama­zon across the world, and now in In­dia.

What are the key take­aways from the Walmart deal?

#1. THE OR­GA­NIZED RE­TAIL (BOTH ON­LINE AND OFFLINE) MAR­KET WILL SHAKE-UP The Walmart ac­qui­si­tion will pave the way for a new growth story for or­ga­nized re­tail, with new in­vest­ments and en­trants vy­ing to cap­ture a slice of the In­dia re­tail mar­ket. The dy­nam­ics of the on­line and offline re­tail will never be the same post the Walmart-Flip­kart deal.At a broader pol­icy level, the In­dian Govern­ment would have to relook, and con­sider open­ing up FDI in multi-brand re­tail. The in­tent should be to ben­e­fit the offline mar­ket in ac­cess­ing cap­i­tal and en­abling home­grown con­glom­er­ates such as Tata Group to bring new global part­ners into In­dia, and, global offline re­tail ma­jors, such as Car­refour Group.

#2. COM­ING TO­GETHER OF SYN­ER­GIES – “CASH AND CARRY” MEETS “DIG­I­TAL” Flip­kart would be able to lever­age the Walmart know-how and ex­per­tise in re­tail in­fra­struc­ture man­age­ment, mar­ket­ing, sup­ply chain, and in lo­gis­tics. It would also be able to re­fine its in­ter­nal busi­ness pro­cesses, and de­liver greater value to dis­count hun­gry con­sumers. Over the past decade, Flip­kart has shown tremen­dous ma­tu­rity and busi­ness sense, through some smart ac­qui­si­tions, in­clud­ing Myn­tra and Jabong.

The Flip­kart ac­qui­si­tion pro­vides Walmart with ready ac­cess to a vast con­sumer base, and a mas­sive lo­gis­tics net­work. It will be able to em­brace a Phy­gi­tal ap­proach in In­dia, by tap­ping its cur­rent 21 stores in In­dia for on­line re­tail op­por­tu­ni­ties, and as ware­house lo­ca­tions for de­liv­ery, com­ple­ment­ing Flip­kart’s net­work. Given its plan to add 50 new stores in In­dia over the next 4-5 years, Walmart and Flip­kart would be in the pole po­si­tion to po­ten­tially win the race against Ama­zon.

#3. SME IT SPEND­ING WILL WIT­NESS AC­CEL­ER­ATED GROWTH Walmart’s Flip­kart ac­qui­si­tion will come as a boost for small ki­rana stores, and other SMEs in the sup­ply chain, en­abling them to get bet­ter mar­ket ac­cess and en­try into or­ga­nized re­tail. As a re­sult, to gain the max­i­mum out of the ‘Phy­gi­tal’ ap­proach, SMEs would start spend­ing more on IT de­ploy­ment, or upgra­da­tion.

#4. THE AMA­ZON STRAT­EGY IN IN­DIA – OR­GANIC GROWTH VER­SUS AC­QUI­SI­TION? Ama­zon has com­mit­ted to in­vest US$5 Bil­lion in In­dia, and more in the com­ing years. Last year, Ama­zon pickedup a 5% eq­uity in Shop­per’s Stop, show­cas­ing its in­tent to grow be­yond on­line.

For now, it will seek to build on its tech­nol­ogy strengths, and its de­vices ecosys­tem. It will lever­age its Prime user base, and build on Alexa’s ca­pa­bil­i­ties.

Would it con­tinue to grow or­gan­i­cally? Or, would it start look­ing at ac­qui­si­tions in In­dia, say, the Fu­ture Group?

#5. THE AL­PHA­BET PLAY Al­pha­bet be­ing a party to the Walmart-Flip­kart deal in­di­cates its se­ri­ous in­tent in eCom­merce in In­dia. In the re­cent past, Al­pha­bet has done some neat in­vest­ments in In­dia, in­clud­ing in pick and drop startup, Dunzo and ecom­merce plat­form, Fynd. Will we wit­ness a fu­ture where Al­pha­bet will buy out Walmart?

#6. THE ON­LINE GRO­CERY BAT­TLE: WILL BIGBAS­KET SUR­VIVE? On­line gro­ceries would be where Walmart-Flip­kart and Ama­zon would start fo­cus­ing go­ing for­ward. While Ama­zon has Ama­zonNow, Flip­kart would like to tap Walmart’s sup­ply chain ex­per­tise in build­ing up its Gro­cery of­fer­ings. Given the deep pock­ets that both Walmart and Ama­zon have, they will com­mit to fur­ther in­vest­ments to com­mand the mar­ket. This up­com­ing bat­tle, it turn, puts a big ques­tion mar­ket to the fu­ture of com­pa­nies, such as BigBas­ket. Would they be able to sus­tain them­selves and com­pete against Walmart on reach as well as price. Tough ques­tion?

#7. HAR­BIN­GER FOR NEW IP CRE­ATION We an­tic­i­pate col­lab­o­ra­tions be­tween Ben­galuru-based Walmart Labs and Flip­kart to give a fil­lip to new IP cre­ation. Flip­kart has been bet­ting big on har­ness­ing AI for bet­ter cus­tomer ex­pe­ri­ence, and has shown in­ter­est in wear­ables. Flip­kart-owned Myn­tra re­cently ac­quired Ben­galuru-based wear­able de­vice startup Wit­works.

Go­ing for­ward, this new Walmart-Flip­kart R&D col­lab­o­ra­tion will lead to new IP gen­er­a­tion and ven­tures.

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