The two biggest retailers in the world, Walmart and Amazon, are speculated to be in advance talks with Flipkart around a possible acquisition of a majority stake in India’s leading online retailer.
While such rumors have floated repeatedly in the last couple of years, Mint reports that Walmart has already completed due diligence procedures and is hoping to acquire a stake of 51% or more in Flipkart, with an investment of $10-12 billion — a deal that the report asserts is likely to succeed.
The great Indian dream
Launched in 2007 and envisioned as the ‘Amazon of India’ before the latter came to India, Flipkart has raised over $6 billion so far and is valued at about $14 billion.
Flipkart owns India’s largest online fashion retailers — Myntra and Jabong — both of which it acquired. Together, Flipkart-Myntra-Jabong has a 70 percent market share of the online fashion business in India. It also owns eBay’s India business as well as popular mobile payments app, PhonePe. With over 100 million users and these popular properties, Flipkart is a valuable asset in the global internet economy for its long-term potential.
India is a huge, yet relatively untapped, market that is growing rapidly. The country had 60 million online shoppers in 2016, which is only 14% of the internet user base in the country. This will rise to over 50% by 2026, according to a report by Morgan Stanley.
Experts also believe that 2019 could be an inflection point for India’s e-commerce market. It is believed that once a consumer has been online for over five years, they are more likely to buy online. Right now, that’s only 30% of India’s 432 million internet users because a bulk of the addition in the internet base has happened in the last three years — primarily piggybacking on the wave of growing smartphone adoption and affordability of mobile internet.
The huge potential of Indian e-commerce makes it an important market for any business looking to expand its global footprint. And that brings the two suitors — Walmart and Amazon — into the picture.
Walmart vs Amazon: The race to retail dominance
While Flipkart continues to lead online retail in India, albeit by a slender margin, Amazon is looking at the endgame, and is set to back its Indian business till it wins. Launched in 2013 in India, the company has already invested more than $2 billion in India and has announced that it will invest $3 billion more.
If Amazon acquires Flipkart, the former will control close to 80% of India’s online retail market virtually doubling its market share. The combined numbers would also mean that Amazon will be a force to be reckoned with in its global domination ambitions, specially rivaling the likes of Alibaba.