Reports indicate that giant retailer Walmart has entered talks with a view to acquiring a minority interest in Flipkart, a leading online retail firm in India. It is understood that an agreement could be inked by March this year. According to sources a Walmart delegation led by Doug McMillon, the retail giant’s chief executive officer, visited the Bengaluru office of Flipkart a week ago.
Others who were part of the delegation included the chief executive officer of Walmart e-commerce, Marc Lore, and Judith McKenna, Walmart’s current chief operating officer and CEO-designate of Walmart International.
“For Walmart, India is an exciting and priority market. Walmart is deeply committed and proud of creating shared value for local communities, kiranas, small farmers and our local supplier partners in India,” said a source.
Economies of scale
Sources further indicate that in the event that an agreement is reached Walmart will purchase a stake of between 15% and 20% in Flipkart. Consequently the two firms will be in a position to enjoy synergies that will help them fight off Amazon in India. To reach a deal longstanding investors may have to offload primary shares as well as secondary shares.
In the retail sector players are trying out an omni-channel strategy which involves giving shoppers the option of purchasing items either online from physical outlets. Walmart, ALibaba and Amazon are among the retail sector players who adopting the model.
Last year Amazon purchased Whole Foods Market, a chain of grocery stores which had 400 outlets at the time mostly concentrated in the United States. At the same time Alibaba is said to be in discussions with U.S. retail firm Krogers with a view to expanding there. And it was only last week that Walmart inked a partnership with Rakuten, an e-commerce firm based in Japan. The deal will see Walmart stocking Aura e-readers manufactured by Kobo, a unit of Rakuten both in brick-and-mortar outlets as well as at Walmart.com. The e-readers compete with Amazon’s Kindle tablets.
Recently Amazon committed itself to investing approximately $5 billion in India while Flipkart intends to invest about 50% of that. A deal with Walmart would give Flipkart the cash infusion it needs. Walmart on the other hand would benefit from accessing e-commerce firm’s database.
In 2017 an investment of close to $2.5 billion was made in Flipkart by Japan’s Softbank Group. Currently the Japanese firm’s stake in Flipkart is about 20%. Tiger Global Management, a U.S. hedge fund, also has a stake of slightly under 20%.