Walmart yesterday announced that it has acquired 77 percent of Flipkart, the India-based online retailer, for $16 billion - the largest acquisition ever by the retailer.
In closing the deal, Walmart gets itself a foothold in a competitive and fast-growing market where global retailers have been prevented from operating except as minority owners in league with local businesses. The purchase also manages to one-up Amazon, which had itself submitted a bid for Flipkart.
The Associated Press writes that “online buying in India has exploded in recent years, and Flipkart had net sales of $4.6 billion in its latest fiscal year, That’s a fraction of Walmart’s latest annual revenue of $485.8 billion, but the company sees big long-term potential. Walmart believes India, which has 1.3 billion people, could be the world’s top five-e-commerce markets within the next five years.”
The AP reports that Flipkart, which is known “for its ubiquitous delivery drivers on their motorcycles with oversized backpacks,” originally allowed customers to pay for their online purchases in cash handed over to delivery personnel; India remains a country where paying with credit or debit cards is seen as risky, but Flipkart now “allows for a variety of payments, from credit cards to gift cards to direct bank transfers.”
Walmart CEO Doug McMillon has been quoted as saying that "India is a priority market for us. We're taking action to position the company for the future.”
In closing the deal, Walmart gets itself a foothold in a competitive and fast-growing market where global retailers have been prevented from operating except as minority owners in league with local businesses. The purchase also manages to one-up Amazon, which had itself submitted a bid for Flipkart.
The Associated Press writes that “online buying in India has exploded in recent years, and Flipkart had net sales of $4.6 billion in its latest fiscal year, That’s a fraction of Walmart’s latest annual revenue of $485.8 billion, but the company sees big long-term potential. Walmart believes India, which has 1.3 billion people, could be the world’s top five-e-commerce markets within the next five years.”
The AP reports that Flipkart, which is known “for its ubiquitous delivery drivers on their motorcycles with oversized backpacks,” originally allowed customers to pay for their online purchases in cash handed over to delivery personnel; India remains a country where paying with credit or debit cards is seen as risky, but Flipkart now “allows for a variety of payments, from credit cards to gift cards to direct bank transfers.”
Walmart CEO Doug McMillon has been quoted as saying that "India is a priority market for us. We're taking action to position the company for the future.”
- KC's View:
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I saw one headline about this acquisition that said, “Walmart gets in touch with its inner Amazon.” I’m not sure that’s exactly the best way to describe it, but this clearly is a bold move - Flipkart is said to have as many customers as Amazon Prime.
Walmart’s changed approach to foreign investment seems to be to limit the downside by getting rid of the things that aren’t contributing either to the bottom line or the long-term strategic vision, and then be take big swings when they seem in synch with its adjusted priorities.
This all makes Walmart scarier, I think.
But…
The New York Times observes: “A historically frugal company that has done very few deals of significance, Walmart is now spending billions as it seeks new overseas markets, tries to capture different demographics and bolsters its grocery offerings.
“In the process, Walmart has begun to create a global alliance of retailers and tech companies that have Amazon as their common rival. It has already teamed with Google for online shopping, while Microsoft will hold a stake in Flipkart alongside Walmart.”
But this is a long-term strategy that is going to require a lot of investment and a lot of patience, both internally and externally. There will be pressure to deliver a return on investment faster than may be possible, and that’ll ramp up the stress felt in Bentonville, where execs will be challenged to show how they are not going too far afield from the company’s core customers and mission.
