Walmart makes $16B bet on India

Walmart will soon reach shoppers in India’s massive consumer market directly, as it takes control of the online retailer Flipkart that’s known for its ubiquitous delivery drivers on their motorcycles with oversized backpacks.

The $16 billion controlling stake, announced Wednesday, is the largest acquisition yet by the world’s largest retailer.

Retail sales are being fueled by a hot economy in India, and both Walmart and Amazon have pushed hard to catch up to Flipkart and become the first major U.S. retailer to establish a substantial foothold in the country.

The move, like Walmart’s decision last month to sell its British unit, Asda, reflects the company’s focus on areas with the potential to grow as it tries to narrow the online gap between itself and Amazon.

Online buying in India has exploded in recent years, and Flipkart had net sales of $4.6 billion in its latest fiscal year, That’s a fraction of Walmart’s latest annual revenue of $485.8 billion, but the company sees big long-term potential. Walmart believes India, which has 1.3 billion people, could be the world’s top five-e-commerce markets within the next five years.

“We are actively working to shape the portfolio of geographies and businesses we’re in, in order to set the company up for success for another generation,” Walmart CEO Doug McMillon said in a conference call Wednesday.

Flipkart is, in some ways, an echo of Amazon. Founded in 2007 by two college friends and former Amazon employees, Flipkart began life as an online bookseller.

In a country where many still see paying online with credit or debit cards as risky, Flipkart earned millions of customers in its early years by allowing buyers to pay cash on delivery. It now allows for a variety of payments, from credit cards to gift cards to direct bank transfers.

The Bangalore-based company has acquired a string of other companies in recent years, from fashion e-commerce company Myntra to mobile payment firm PhonePe. Flipkart now has over 100 million registered users and more than 100,000 registered sellers. Flipkart’s supply chain arm, eKart, is established more than 800 cities and makes 500,000 deliveries daily.

Flipkart’s success and Indian law that puts limits on foreign retailers made it an attractive target, and rumors swirled about Amazon also circling Flipkart long after it was reported to be in talks with Walmart.

Foreign retailers, including Walmart, have faced years of political resistance to opening brickand-mortar outlets in India, where mom-and-pop store owners wield enormous influence.

Whether the Flipkart deal signals a change remains unclear, but the Flipkart purchase gives Walmart far more influence in India — both politically and economically — and positions it to shift quicker into retail outlets if the regulatory landscape changes.

The deal hasn’t gone down well with the tens of millions of small traders who for years used political muscle to slow the arrival of international retailers.

It is “a clear attempt to control and dominate the retail trade of India by Walmart,” the Confederation of All India Traders said.

Aijaz Rahi / Associated Press Walmart is paying $16 billion for a controlling stake in Flipkart, breaking into a fast-growing economy where it has struggled to establish a foothold.