Walmart has agreed to a deal to buy a majority stake in Indian e-commerce giant Flipkart for $16 billion. Here, Mintel analysts in the US and India share their perspective on the deal.
Walmart’s bid for a majority stake in Flipkart was one of the most anticipated mergers in India, with the deal now final. This is being touted as Walmart’s largest acquisition so far, with the US retailer set to acquire a roughly 77% stake in Flipkart for around US$16 billion.
For Flipkart, this deal could be the fillip it needs to realise its online grocery plans, drawing on Walmart’s expertise in this sector. In late 2017, Flipkart made a soft entry into India’s grocery category—its second attempt—even launching its own label Flipkart Supermarket. This was in direct competition with Amazon’s launch of its grocery app, Amazon Now.
According to Mintel estimates, grocery accounted for a negligible share of the nearly INR1.7 trillion e-commerce market in India in 2016. What’s more, there are still only a handful of players like BigBasket and Grofers with a multi-city presence. But India’s online grocery market is expected to see rapid growth in the coming years and a number of retailers have already started to expand in this arena. Therefore, it isn’t surprising that both Amazon and Flipkart see the segment as a major focal point.
Latest research from Mintel indicates that a significant minority of urban Indian consumers are indeed buying their groceries online. As internet penetration grows, Indian consumers will become more comfortable buying durable products online, a sentiment that will also trickle down to grocery shopping.
Major online grocers in India have limited operations due to the complex infrastructure and logistical demands of the sector, alongside limited capital investment. On the other hand, Amazon is in a position to fund such a venture, having already pledged US$5 billion to its growth in India. Now with Walmart’s backing, Flipkart will likely be able to do the same, making for a very interesting future for e-commerce and online grocery shopping in India.
by Ranjana Sundaresan, Senior Research Analyst, India