American retail giant Walmart today wrapped up the acquisition of Flipkart in the world’s largest ever ecommerce deal so far. Walmart paid $16 billion for around 77% stake in Bengaluru-based Flipkart. The deal is widely expected to shake up one of the most thriving and exciting ecommerce markets the world over.
Here are 10 key things to know about the jumbo ecommerce deal:
1) The American giant Walmart is very likely to revolutionise Indian retail with low prices and a vast variety of consumer goods.
2) Flipkart founder Sachin Bansal will now exit completely. He has sold Walmart his entire 5.5% stake. Sachin, along with co-founder Binny Bansal, once worked as interns at Amazon. They started Flipkart in 2007 in an apartment in Bengaluru’s Koramangala.
3) The deal has made India’s online sellers very jittery because they fear Walmart could wipe them off. The American retail behemoth has long had a reputation of killing small businesses with cut-throat pricing.
4) Walmart had been trying to enter India for years. Strict FDI rules has so far kept its presence limited to just the cash-and-carry segment. It currently has 21 stores in India.
5) With Walmart buying into Flipkart, the fight for India between Amazon and Flipkart is set to grow more frenetic.
6) Flipkart has maintained leadership position in fast growth categories like fashion, electronics, mobile and large appliances. Flipkart, along with its fashion units, controls nearly 40% of Indian online retail. Amazon is close on its heels.
7) A more intense battle between Flipkart and Amazon is likely to create a huge supply chain infra, along with a large number of jobs.
8) Deep discount — effective but cash-burning — has been Flipkart main strategy to fight Amazon. Walmart would give Flipkart not just more funds for the fight but also a formidable ally with great experience in retailing and logistics.
9) The deal is set to bring about a big change in Indian etail. While Walmart is sure to bring its cut-price game to India, Amazon’s counter push may ensure that merchandise prices in India head even lower.
10) Analysts say Flipkart is expected to generate meaningful losses for at least the next few years, so this looks like a shot at the future. Lending credence to this view, Walmart shares plunged 4% and m-cap went down by $10 billion after the formal deal announcement was made.
Source: Economic Times