One year on, Flipkart acquisition proves to be a mixed bag for Walmart

Topics Walmart | Flipkart

As Walmart completes one year of its acquisition of homegrown e-commerce major Flipkart, it has been a mixed bag for the world’s largest retailer. 

Experts tracking both the firms say that while the Bentonville-headquartered company has brought in greater synergies leveraging the expertise of Flipkart group companies, the duo may not have been able to exploit the India potential fully. 

This is mainly due to regulatory hurdles and fierce competition from global rival Amazon.

“The partnership between Walmart and Flipkart is running without much hiccups so far and Flipkart has delivered on many of the initiatives. However, they had to face certain challenges owing to changes in the e-commerce policy,” said Satish Meena, senior forecast analyst at Forrester Research. 

The policy, which came into force from February 1, had barred e-commerce players from selling products through entities in which they own a stake.

Vendors were also not allowed to have more than 25 per cent of their revenues coming from a single platform. 

The last one year it has been under the Walmart fold, Flipkart, including its group companies, launched a number of initiatives to expand its scope of operations and broaden reach to smaller cities and towns. 

In July, Flipkart launched a co-branded credit card to provide customers access to formal credit which has received good response. 

Earlier this year, Flipkart teamed up with Walmart Canada to launch its premium fashion platform, Myntra, on the Walmart Canada portal. 

“When Flipkart joined the Walmart family, we said we would accomplish a lot together. And one year on, I’m proud to say we have,” said Judith McKenna, president and CEO, Walmart International, in a blog post on Tuesday. 

“As I reflect on Flipkart’s first year with us, I’m tremendously proud of our partnership and the way it continues to move from strength to strength. I look forward to continuing to support and work with the Flipkart team to achieve even greater success in the coming years.” 

Giving the example of group company PhonePe, McKenna said in less than three years of its operations, the digital payments company has surpassed 2 billion transactions and continues to grow. Recently, PhonePe services was introduced to Walmart India’s B2B Cash & Carry stores. “It’s another step towards providing small business owners with new payment options that create convenience. And, it’s another thoughtful way we’re connecting the dots across Flipkart and Walmart – strengthening both businesses in the process,” added McKenna.

Ankur Pahwa, partner and national leader, e-commerce and consumer internet at EY India, said in the past one year, both the companies have been betting big on areas such as grocery while they are aggressively expanding into tier II and III cities by allying with local businesses. 

As it plans to tap the next 100 million customers, the e-commerce major is bringing in new services such as video streaming. It is offering users better experiences through integrated social-shopping app features and regional language interface, Pahwa added.

Meena, however, says Flipkart-Walmart has not been able to make much inroads into the grocery space, despite the initial noise. He also says, Walmart is yet to bring more products (from its supply chain) onto the Flipkart platform. “One area which I think it still has to have more clarity on is the way Amazon is picking up stakes in offline retail stores such as Shoppers Stop and More,” said Meena.

As it continues to absorb impact of the Flipkart acquisition, Walmart’s international business is taking a hit in the interim. In its Q2FY20 numbers announced last week, Walmart said its international business posted a decline of 29.6 per cent and this was largely attributed to Flipkart. 

In the previous quarter as well, Walmart International’s operating income had declined 41.7 per cent on account of Flipkart.

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