Walmart e-entry makes India sweet spot for global majors

US retail major to change shopping experience in country; traders see more woes

The whopping $16-billion mega deal by global retail giant Walmart with the country's leading e-tailer Flipkart for majority stake makes India an attractive destination for global majors in the digital space, industry experts said on Wednesday.

“The deal indicates attractiveness of India's consumption market for global majors. With Walmart acquiring majority stake in Flipkart, we expect greater thrust on the online grocery segment," rating agency Crisil Research Director Ajay Srinivasan said in a statement here.

"This is Rs 1 lakh crore all cash deal which is a perfect answer to those who were dismissive of Indian startups in an open-for-all market," tweeted Paytm Founder Vijay Shekar Sharma.

Sharma expects online grocery to be the fastest growing segment in the e-retail space, growing at a 65-70 per cent compounded average growth rate (CAGR) to touch $100-billion in revenues by fiscal 2020. Biotechnology major Biocon Chairperson Kiran MazumdarShaw said the deal was an endorsement for India's first e-tailing company.

“It's capital intensive business that needs deep pockets which Walmart has," tweeted Shaw. Advisory firm Gartner director Adrian Lee said in a statement here: "We expect the status quo to remain within the year after the mega deal. It's an extension of the $500-billion Walmart's global expansion strategy." Lee also expects the competition getting aggressive as Amazon counter-offered Walmart for a stake in Flipkart.

“Both have cash reserves and the outcome in the Indian sub-continent will determine the access to its growing middle-class consumers for dominance, outside the US," Lee said. Cautioning consumers from expecting quick changes in the shopping experience because of the deal, Lee said user choice should be improved with more Walmart labels differentiating the merchandise. "Flipkart will diversify its inventory to attract more Indian consumer segments that haven't started shopping online," said Lee.

With a huge user base, India looms as an attractive market for retailers. It's estimated that 15 per cent (200 million) consumers will shop online by this year-end. The deal will also benefit homegrown firms, as consumers are attuned and comfortable to shopping online with ecommerce marketplaces. "As e-commerce penetration remains low (15 per cent), I expect discounts and promotions to continue," added Lee.