What Walmart Will Do Next After Buying In India, Selling In UK

10 May, 2018, 14:13 | Author: Darren Santiago
  • SoftBank CEO Masayoshi Son Says Walmart is purchasing Flipkart

Walmart Inc. announced on Wednesday, May 9 it had reached a $16 billion deal to buy a majority stake in Flipkart, India's leading e-commerce platform.

But in the holiday quarter, USA online sales growth slowed considerably and the company said it would shift some resources away from jet.com to walmart.com, a disappointing turn of events that could help explain investors' anxiety about the Flipkart news. Satish Meena, Senior Forecast Analyst at Forrester Research, said while Walmart can utilise its sourcing and retail prowess to aid Flipkart's efficiency, it still needed to come up with a product that can match Amazon's Prime loyalty programme.

Besides, Softbank, the largest investor, too, has chose to sell their 20% stake in the venture, and they will be getting $4 billion on their $2.5 billion investment into Flipkart. It remains indirectly invested in Flipkart via Tencent which is still invested in the company, has a seat on the board and is viewed by Walmart as a key strategic partner.

SoftBank also plans to give up some of its stake in USA wireless company Sprint, under a $26.5 billion merger deal that will combine it with T-Mobile.

Global retail giant Walmart on May 9, 2018 formally signed a definitive agreement to acquire 77 percent stake in Flipkart with an investment of around United States dollars 16 billion.

"This investment is of huge importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India", Flipkart co-founder and CEO Binny Bansal said in an announcement.

Flipkart was founded in 2007 by former Amazon employees Sachin Bansal and Binny Bansal, who are not related.

Now, ET claims Bansal was deeply engaged in the negotiations with Walmart, and was even planning to buy more shares and not sell his stake.

Other moves are expected to follow, as the Asda sale "was the first volley" in a broader reshuffle of Walmart's global holdings, said Mark Stoeckle, portfolio manager of the Adams Diversified Equity Fund, which owns Walmart shares.

"It would have been out of character for Amazon to write a check of that size to consolidate its market share in India, where it is already growing at a fast clip", Roosevelt's Benowitz said. He's certainly mindful of past missteps overseas, such as his 2011 decision to buy an unprofitable, second-tier online marketplace in China that's forced the company to play catch-up to Alibaba - the Amazon of China - ever since.

In a country where many still see paying online with credit or debit cards as risky, Flipkart earned millions of customers in its early years by allowing buyers to pay cash on delivery. Flipkart, too, would provide local knowledge and customer insights to strengthen Walmart's play in the Indian market. It's easy to get wrapped up in the excitement of Amazon being the most exciting, and now largest, company ever; but Walmart's operational excellence and deep war chest are nothing to sneeze at.

Walmart plans to link consumers through its partnership with kirana stores.

Walmart isn't new to India. Amazon boss Jeff Bezos has committed more than $5 billion to grabbing a big slice of India's e-commerce pie after failing to make inroads in China.

Shareholders in the U.S. are complaining that Walmart has given up too much, in return for too little, by paying $16 billion for a website which a few years ago sold books online, and their founders delivered the books on their scooter. NITI Aayog CEO Amitabh Kant on Wednesday made the government's position clear saying the government is at an arm's length in deals like these but will act as a facilitator for the e-commerce sector.

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