Walmart has continuously grabbing the market share all over
the world by acquiring the various origination to mark the
presence all over the world, acquisition is one of the best
strategy a company can execute. The price of the deals are
less than if we compare the volume or the market
capitalization done by the Walmart. By expanding the
business and acquiring the various companies all over the
world Walmart has beaten the competition.
The biggest success story of Indian e-commerce started from
a two-bedroom apartment in Bengaluru.
On Sept. 15, 2007, Sachin Bansal and Binny Bansal (not
related) started Flipkart as an online bookstore. The two had
known each other since 2005 when they attended the Indian
Institute of Technology Delhi (IIT-Delhi) together and were
colleagues at Amazon briefly.
Eleven years later, the world’s largest retailer, Walmart, has
agreed to buy a controlling stake in the company, Softbank
chief executive officer Masayoshi Son said today (May 09).
Flipkart’s journey has been nothing short of a roller-coaster
ride. The company went from record-breaking investments
and an acquisition spree to failed business experiments and
devaluations—only to bounce back.
The Deal-
Walmart, the largest brick-and-mortar retailer in the world
acquired a 77 percent stake in India’s Flipkart for $16 billion,
marking the beginning of its first real battle with Amazon in
an emerging market. It starts with the size of India — it’s the
second-most-populous country in the world, just behind
China. Of course, that size alone doesn’t matter — rather, it’s
the shifting behavior of Indian consumers.
India is home to a growing middle class, fueling household
spending growth on par with that of China — and at a faster
clip than the more mature U.S. market.
With a fragmented brick-and-mortar retail market in the
country, more of that spending is gravitating online where the
Indian shopper can purchase a wide range of products in one
spot — whether on Flipkart or Amazon. In 2017, consumers
in India spent $21 billion on e-commerce, making it the 10th-
biggest e-commerce market in the world, according to data
from digital research firm eMarketer.
The deal, having 77 percent stake in the Indian e-com
company has many reasons for Walmart why an Indian
company, Indian market, and e-commerce market. One of the
strongest reason may be presence of Amazon in the Indian
market and global rival of Walmart. Walmart-Flipkart deal
would give a big push to the e-commerce market—estimated
to grow from a share of 2-2.5% of the retail market to about
30% in 10 years—and thereby act like a force multiplier for
the start-up ecosystem.
This deal is a good news for the future e-com market and new
startups to mark their presence in the international and
national market, many startups founded and some of them are
successful, and Flipkart is one of those successful Indian
startup.
Reason for Acquisition-
Market Strategy, Insecurity, ambition, growing Indian
market etc. there are list of many possible reasons for the
deal.
Walmart’s Amazon problem Walmart’s total revenue for the
last fiscal was over $500 billion, while Amazon’s net sales
were $177.9 billion. Walmart showed net income of over $20
billion, while Amazon’s net income was $3 billion. Yet,
Amazon today is among the top five companies in the world
in terms of market capitalisation at over $680 billion market
cap. In fact, for a brief time this year the Seattle-based
ecommerce giant was the second most valuable company in
the world, behind Apple. Analysts have also begun predicting
that Amazon could beat Apple to become the first company
in the world with a $1 trillion market capitalisation.
Walmart’s market cap on the other hand is at just over $250
billion, not small change at all, but smaller than Amazon’s.
The reason for the stock markets in the US putting greater
value in Amazon than Walmart is because the former is seen
as the company with a more robust future and growth
potential. Ecommerce accounted for 13 percent of total retail
sales in the US in 2017 and 49 percent of growth, and
Amazon is responsible for most of the growth. Overall
ecommerce in the US grew at 16 percent last year. According
to ecommerce business intelligence firm Internet Retailer,
Amazon accounted for over 70 percent of the $62.47 billion
growth in US online retail in 2017 and almost 35 percent of
the $127 billion rise in the overall retail market. Walmart has
spent the last few years playing catch-up in ecommerce. It
spent $3.3 billion in late 2016 to acquire Jet.com, a direct
competitor of Amazon. Last fiscal, Walmart had ecommerce
sales of $11.5 billion, a growth of 44 percent. However, in
the last quarter, ecommerce sales grew at only 23 percent,
much slower than Amazon.
“In the US, Walmart is the only formidable competitor left
for Amazon. Walmart has been growing its ecommerce
operations a lot and Amazon has been increasing its footprint
with physical stores. It’s natural for that battle to spill into
international turf as well,” says Kartik Hosanagar, Professor
at The Wharton School of the University of Pennsylvania.
Despite the potential for growth in online retail within US,
Amazon has already made big strides in international
markets. This is because the expectation is that emerging
markets of today will become growth drivers of the future.
China’s Alibaba, for instance, is valued at over $520 billion,
and most US tech and ecommerce companies either missed
the China bus or were kicked out.
India is the only big ecommerce market still up for grabs.
India’s online retail market grew at 23 percent in 2017. While
India’s overall retail market is over $670 billion in size,
online sales is just at $20 billion. The headroom for growth
is immense, with 60 percent growth expected this year.
Amazon is already in a strong position in India with a market
share of around 35 percent, compared to Flipkart Group’s 45
percent. If Amazon extends this lead in India or builds an
unassailable position, the company will be able to extend its
overall lead over Walmart dramatically.
Walmart’s India problem The Bentonville, Arkansas-based
retail giant has been in India for over a decade, but hasn’t
managed to grab any share of the retail market. This is
primarily because of the country’s FDI rules in multi-brand
retail. In 2011, India allowed 51 percent FDI in multi-brand
retail, but allows 100 percent FDI in the wholesale segment.
Walmart had a partnership with Bharti Enterprises, but that
never scaled up and the partnership ended in 2013. Walmart
still operates 21 Best Price wholesale stores in India, but has
no presence in retail Ganesh, serial entrepreneur and startup
investor, says: “Walmart has consistently missed the bus.
They are an iconic brand, have the cash and the market cap,
but have let others dominate the market, especially in markets
other than the US. Unless they do something drastic they will
lose India too. They should have done something like this (an
investment into Flipkart) at least four years ago, but it is
better late than never. It is a desperate situation for them.”
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