Walmart’s move to acquire a controlling stake in Flipkart will start a new era in India for both online and offline retail which will benefit the entire retail sector, said Kishore Biyani, founder and CEO, Future Group.
“This deal means India is building an ecosystem like in China. A combination of online and offline is the new way forward,” he said.
“We were expecting it to happen much faster. This deal will grow the market and it is good for the sector. We welcome it,” said Mr. Biyani, whose Future Group includes the Big Bazaar and Nilgiris retail chains.
He discounted any immediate threat to his retail group. “There is nothing new. Flipkart exists and so does Walmart in India. So, it makes no difference for us now. However, we will know how this deal pans out, in future.”
The move would also trigger consolidation in the market, said Ankur Bisen, senior vice president, Technopak. “This will allow the sector to respond to market need gaps in the right manner.”
“New categories like food and groceries that are very big but have not moved online will receive attention. Marketing intensity will reduce and these are all the positives in the maturing of the sector,” he said. “The deal is very positive for both e-commerce and the retail sector in general. The sector will now be known as the custodian of the largest FDI deal in India. This has overtaken the $12.9 billion Rosnoft acquisition of Essar Oil,” he said.
The online retail market till now has largely pivoted around fashion and electronics but these sectors control only 20% of the total retail pie. Many other categories are yet to move online and that may look appetising for Walmart.
Mr. Bisen said the Flipkart deal offered Walmart the opportunity to catapult into a leadership position straight away. “No other market, apart from China and U.S., offers such a big opportunity for Walmart. In the U.S., it is already a leader and in China Alibaba is clearly a dominant player,” he said.
However, Kumar Rajagopalan, CEO, Retailers Association of India, without specifically commenting on this deal, said, “We believe that some e-commerce companies in India have not been adhering to the guidelines issued under the Press Note 3 of the FDI Policy for marketplaces.
“These companies have been directly or indirectly participating in [under]pricing and discounting, which is against the policy that seeks to create a level playing field. We hope the government takes strong steps to ensure adherence to FDI policy,” he said.
‘Control over data’
The Confederation of All India Traders said the deal was an attempt by Walmart to control and dominate India’s retail trade through e-commerce which was ‘only a bridge to reach out to the offline retail market’. It pointed out that whoever controls the platform, is also in control of data. “It is much more difficult for the government to control and regulate foreign-owned platforms.”
Additionally, it said, in the absence of any e-commerce policy, predatory pricing and deep discounts would continue in the e-commerce segment. “e-Walmart will certainly vitiate the e commerce and retail market. There will be an uneven level-playing field to the disadvantage of retail traders. Only the venture capitalist, investors and promoters will be benefited and not the country,” CAIT Secretary General Praveen Khandelwal said.
‘Japan jinx broken’
“One complementary effect this deal may have is a strong positive push for Japanese investments in Indian companies. Till now, most big-ticket Japanese investments in India had underperformed or had got entangled in various market-related or company-specific issues,” said Manoj Patkar, executive director and partner, 7i Advisors LLP.
“This had led to a cautious approach among many Japanese investors while evaluating investment opportunities in India. However, with the Walmart-Flipkart deal, Softbank’s $2.5bn investment in Flipkart has now delivered 60% returns in 9 months. This success story can push more Japanese conglomerates to seriously evaluate and invest in Indian opportunities.”
(With Piyush Pandey in Mumbai and Yuthika Bhargava in New Delhi)
