Two giants battling it out for the right to rule over one of the most populous countries in the world. No, it’s not the plot to the latest CGI-filled Hollywood blockbuster. The two giants in question are Walmart and Amazon, and the prize at stake? Access to the hundreds of millions of online shoppers in India.
Walmart’s current offensive in this ongoing war revolves around Indian e-commerce platform Flipkart. It’s the top online shopping destination in the country, though the ever-ravenous Amazon nips at its heels in second place. Recently, Walmart offered $16 billion to acquire a majority stake in Flipkart of approximately 77 percent, a proposal which includes $2 billion as new equity funding. A successful deal would vault Walmart over its dreaded rival within the Indian market by allowing it access to Flipkart’s 100 million users.
Like Amazon, Flipkart cut its teeth pushing books before expanding into the comprehensive shopping site it is now. The acquisition would be a boon for Walmart, who have been plagued for decades by failure after failure when expanding into international markets. Flipkart is both already popular with Indian shoppers while also skilled at handling India’s transportation networks. As such, the pending deal—which Walmart hopes to close by the end of 2018—would remove many of the obstacles that have stymied the American behemoth in the past. Logistics issues, cultural differences and other frequent international marketing challenges need not apply.
Amazon strikes back…poorly
As Walmart closed in on Flipkart, Amazon was rumored to have been mounting its own counterattack. Amazon had suggested its potential offer would be some 10 percent higher than Walmart’s, an attractive proposition to Flipkart minority shareholder Softbank. However, with Amazon already controlling the second-largest share of Indian’s ecommerce market, such a deal might have run afoul of the country’s competition regulation authorities. For this reason, many of Flipkart’s other shareholders viewed Walmart as the more attractive suitor, a factor which may have led to the board’s decision to grant Walmart the sale. While the Confederation of All India Traders have protested Walmart’s bid, their case is seen as unlikely to affect proceedings.
China remains unconquered
Walmart may be hoping to continue the momentum it’s built since acquiring a minority stake in Chinese ecommerce firm JD.com, second in China behind Alibaba. Both Amazon and Walmart have faced significant issues cracking the Chinese market, in no small part due to the country’s strong protectionism favoring domestic companies. While Amazon maintains a Chinese market share of around one percent, Walmart stands to gain access to a vastly more significant portion thanks to its new local partner. In a similar fashion, its pending acquisition of Flipkart may provide it with newfound footing in India.
Though this deal will be Walmart’s priciest yet, with Flipkart projected to continue operating at a loss for several more years, the company feels that India’s potent ecommerce market will more than make up for any initial investment. With Walmart and Amazon having both botched their opportunities to become China’s primary ecommerce player, the stakes in India couldn’t be higher.