US-based offline and online retailer Walmart Stores Inc. is in early talks with Indian e-commerce firm Flipkart India Pvt. Ltd for an equity partnership, according to a report.
The Economic Times reported, citing two sources it didn’t name, that “the companies are engaged in early talks and a meeting is scheduled this week”. These discussions, reportedly, include the world’s largest retailer picking up a minority stake in Flipkart.
A Walmart India spokesperson told TechCircle in an email statement that “as a policy we don’t comment on speculative reports”. Flipkart said in a statement that “it is our policy not to comment on rumours or speculations.”
TechCircle had written in August about speculation of a possible deal when Walmart bought US web retailer Jet.com. Walmart had bought Jet.com for $3.3 billion in the largest ever buyout of a US e-commerce startup.
In June, Walmart had announced acquiring a 5% stake in Chinese ecommerce giant JD.com for about $1.5 billion. According to the report in The Economic Times, the ongoing discussions may lead to a similar deal with India’s Flipkart.
Earlier this month, Walmart India CEO Krish Iyer had said at an event that the company was evaluating the policy guidelines of 100% foreign direct investment in food retail.
Walmart has been present in India for almost a decade now. The company had entered into an equal joint venture with Sunil Bharti Mittal’s Bharti Enterprises. However, in 2013, it bought out its partner and decided to go solo. Walmart operates 21 Best Price wholesale offline stores in nine states in India.
E-commerce sales in the US in 2015 totalled $340 billion, a 14.6% increase over 2014’s $298.3 billion, according to non-adjusted estimates released by the US Department of Commerce. India, according to industry body Assocham, is one of the fastest-growing e-commerce markets in the world and is likely to touch $38-billion in gross merchandise value (GMV) this year, a 67% jump over the $23 billion it clocked last year. Still, it is tiny in comparison with the US.
The Indian market is attractive for Walmart for a couple of reasons. Most e-tailers with global ambitions cannot ignore this fast-growing market. Also, its arch rival Amazon is quite bullish on India. Amazon India VP Amit Agarwal in May had announced that India is the second-largest market for Amazon in terms of new customers.
“The partnership is a win-win for both the players. Flipkart gets access to Walmart funds and Walmart gets to put the first strong footstep in the Indian market,” says Anil Kumar, founder of RedSeer Consulting. “Overall, it is still pretty early to comment where the next turn in the tide will come from.”
In India, Amazon is competing with the country’s largest e-commerce company Flipkart and Snapdeal even as other global companies such as China’s Alibaba and Japan’s Rakuten are readying to stake a claim in the market.
This is why Flipkart can be a possible partner or an eventual buyout prospect for Walmart. Heavily funded by global investors such as Tiger Global, Naspers, Iconiq and Accel Partners, Flipkart, according to media reports, has been struggling to raise fresh funds to keep its growth momentum going.
There have been media reports in the past to suggest that Flipkart has held talks with Amazon for a buyout but the latter walked away from the table owing to high valuation sought by the company.
Walmart employs around 2.3 million people in its 11,527 stores across 28 countries and recorded $482 billion in total revenue last year.
But the world’s largest retailer may be worried about its declining online sales in the US while Amazon continues to grow impressively, both in the US and India. Also, Walmart’s online sales were a mere $13.6 billion in 2015 against Amazon’s $107 billion.
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