Will Walmart’s investment be enough to keep Amazon India away from the top spot?
India’s largest e-commerce company, Flipkart, is in talks with America’s largest retailer, Walmart, over an investment deal that would see the U.S. giant obtain a stake in the Indian entity for between $750 million and $1 billion.
This follows a number of e-commerce investments Walmart has been making worldwide this year, such as the acquisition of Jet.com in the U.S. and purchase of a 5% stake in China’s #2 online market, JD.com, according to the Wall Street Journal. Since Walmart has not yet been able to penetrate the Indian market except as a wholesaler, an agreement with Flipkart would be a boost to its foreign operations.
The deal would also help Flipkart ensure its continued prosperity in the wake of what Quartz describes as “tough times” due to management turnover, investment shortfalls, and competition from Amazon India.
Flipkart was founded in 2007 by Sachin and Binny Bansal, both of whom used to work at Amazon.com, and quickly became a preferred online books retailer in the country with a cash on delivery option for customers, growing from 50,000 titles that year to 4 million in just three years. The retailer’s other product selections have expanded similarly, such as in consumer electronics – the company will be taking pre-bookings for the iPhone 7 and iPhone 7 Plus this week, the first time Apple has offered this online retail option for its customers there. Samsung will also exclusively sell its Galaxy On8 through Flipkart this fall.
Such moves may not be enough, though, to ensure Flipkart’s continued dominance with a 43% market share across the national e-commerce sector. Efforts to introduce subscription services have not caught on, for instance, due to the Indian market’s characteristics. Flipkart’s – and also Amazon India’s – reliance on discounted sales to remain competitive in the South Asian market ensures they are losing millions of dollars a year, reports CNBC, yet cannot risk reversing this policy for fear of being crushed by the competition.
With this in mind, Amazon is also pursuing new ventures in India, challenging Flipkart with its own exclusive retail arrangements and launching a five-day sale beginning October 1 to compete with Flipkart’s own “Big Billion Day” sale.