With Flipkart being acquired by Walmart last May, there’s an air of optimism in the Indian startup space. What looks like the end of horizontal commerce, what does this mean in the grand scheme of things?
The deal has seen India emerge as the final frontier to the path to global retail domination. Keep in mind this would turn out to be a face-off between all the top online sellers such as Amazon, Alibaba and Walmart.
With the deal sealed off, the founder, Sachin Bansal, will be exiting the Koramangala based company. Sachin and co-founder Binny Bansal founded the company having a brief stint with Amazon. They operated within an apartment building in Koramangala.
The Flipkart-Walmart deal will commence the second phase of India’s e-commerce journey. This will see a significant player, projected to be Walmart, consolidate itself in India. This phase is expected to be primarily business and integration driven. The first phase mainly had high competition and high-risk business models which, in the long run, turned out to be futile.
Amazon is also said to have expressed their interest in buying out Flipkart. With Amazon having a 27% hold in India’s e-commerce market share, Amazon also saw Flipkart as key in their pursuit of growth.
Walmart, trying to enter India for years, had a joint venture with a local company in India that was started in 2007 and called off in 2013. However, due to the country’s restrictions on foreign investment, their presence was mostly invariable.
The deal is reported to be around 16 billion for a 77% share in Flipkart, the largest deal in Walmart’s history. A growth in Flipkart’s online fashion market share, standing at around 40%, is expected to be seen.
A competition in the prices of goods is also forseen with the Flipkart- Walmart deal. Bringing its low price game to India, Amazon is only expected to follow suit, resulting in ever lower prices of goods.
An analysis of Flipkart in the next few years would only see them generate losses, although meaningful. This has also seen Walmart’s shares go down by 4% and a 10 billion dollar m-cap decrease.
An attraction from worldwide investors to India will be seen as a positive for startups all over the country. With Walmart all set to make its mark, US businesses will look to get into India directly and not through venture capitalism.
Although everything seems positive, the biggest hit will be taken by the Indian online sellers, who’d have to compete with industrial veterans like Amazon and Flipkart. We have no choice but to wait and see what the Indian e-commerce has in store for the country.