India Today - - UPFRONT - —M.G. Arun

Af­ter months of spec­u­la­tion, the $500 bil­lion US re­tail giant Wal­mart has bought a 77 per cent stake in the home­grown on­line re­tailer Flip­kart for a con­sid­er­a­tion of $16 bil­lion (over Rs 1 lakh crore), pit­ting it­self di­rectly against ri­val Amer­i­can firm Ama­zon in In­dia. The deal, one of the largest in­volv­ing an In­dian com­pany, was an­nounced by vis­it­ing Wal­mart CEO Doug McMil­lon in Ben­galuru on May 9.

What ex­plains Wal­mart’s in­ter­est in In­dia? The In­dian e-com­merce mar­ket is ex­pected to grow to $200 bil­lion (Rs 13.4 lakh crore) by 2026, from $38.5 bil­lion (Rs 2.6 lakh crore) as of 2017, ac­cord­ing to the In­dia Brand Eq­uity Foun­da­tion, a re­search body un­der the com­merce min­istry. This growth has been trig­gered by in­creas­ing in­ter­net and smart­phone pen­e­tra­tion. In­dia’s to­tal in­ter­net user base will be 829 mil­lion by 2021, or just un­der 60 per cent of the to­tal pop­u­la­tion.

To­tal on­line spend­ing, in­clud­ing do­mes­tic and cross-bor­der pur­chases, is ex­pected to in­crease by 31 per cent year-on-year to Rs 8.76 lakh crore ($135.8 bil­lion) by 2018-end. The Flip­kart deal is a sort of sec­ond com­ing for Wal­mart af­ter it called off a joint ven­ture with Bharti En­ter­prises in the whole­sale cash-and-carry busi­ness in 2013. The US firm was then ac­cused of at­tempt­ing a back­door en­try into the multi-brand re­tail space, where for­eign en­ti­ties are dis­al­lowed. It then fo­cused on whole­sale cash-and-carry stores, and op­er­ates 21 such stores and one ful­fil­ment cen­tre in In­dia. Wal­mart now plans to scale up its sourc­ing of

In­dian mer­chan­dise and farm prod­ucts to $7 bil­lion (Rs 46,900 crore) over an un­spec­i­fied pe­riod of time.

Swadeshi ad­vo­cates will be dis­com­fited to learn that In­dia’s largest e-com­merce firm is fall­ing into for­eign hands. But this was in­evitable, and prob­a­bly the only way Flip­kart could stand up to com­pe­ti­tion from Ama­zon. In over four years, Ama­zon In­dia, which of­fers over 160 mil­lion prod­ucts on its plat­form, has turned into a for­mi­da­ble e-tail player, gar­ner­ing a 44 per cent cus­tomer share and a growth rate 50 per cent higher than the com­pe­ti­tion.

Not that Flip­kart was a pushover. When IIT Delhi batch­mates Sachin Bansal and Binny Bansal launched the por­tal in 2007, they wouldn’t have dreamt their com­pany would be val­ued at $20 bil­lion (Rs 1.34 lakh crore) in a lit­tle over ten years (Sachin ex­ited the firm post the deal, sell­ing off his 5.5 per cent stake, but Binny will be ex­ec­u­tive chair­man and group CEO, and hold 4.5 per cent). It has been the dar­ling of in­vestors, and fol­low­ing in­vest­ments from Softbank Vi­sion Fund, eBay, Mi­crosoft and Ten­cent had in ex­cess of $4 bil­lion (Rs 26,800 crore) cash on its bal­ance sheet as on Au­gust 2017. Re­ports say in the fis­cal year up to March 31, 2018, Flip­kart saw goods worth $7.5 bil­lion (Rs 50,250 crore), traded on its site.

It’s not yet a done deal, though. Lo­cal traders have op­posed the move, ar­gu­ing the deep dis­counts of­fered by on­line su­per­mar­kets im­peril their liveli­hoods. The Con­fed­er­a­tion of All In­dia Traders has de­manded state scru­tiny of the deal, which it says will en­cour­age preda­tory pric­ing. But given that elec­tions are right around the cor­ner in Karnataka, the gov­ern­ment is likely to keep its dis­tance.

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