Walmart Buys Flipkart

Question 1

Walmart Inc on Wednesday announced that it would pay $16 billion for an initial stake of approximately 77% in homegrown e-commerce company Flipkart. The deal values Flipkart at $20.8 billion, according to sources.

** The remainder of the business will be held by some of Flipkart’s existing shareholders, including Binny Bansal, who co-founded Flipkart along with Sachin Bansal in 2007; China’s Tencent Holdings Ltd.; Tiger Global Management LLC; and Microsoft Corp. ***

Answer 1

In the fiscal year ending March 31, Walmart said Flipkart recorded GMV (gross merchandise value) of $7.5 billion and net sales of $4.6 billion, representing more than 50% year-over-year growth in both cases. With the investment, Flipkart will leverage Walmart’s omnichannel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength.

Question 2

Merits:

1. The war between Flipkart and Amazon will not only create a vast infrastructure of supply chain but also a large number of jobs.
2. The retail market by 2027 is expected to hit $1.8 trillion from $650 billion in 2016. Of this, the biggest driver is expected to be food and grocery, pegged at $1.1 trillion in 2027 from $420 billion in 2016, which will drive a separate and similarly substantial investment by Walmart in agriculture.
   Agriculture and infrastructure sectors will get a big boost due to competition between Flipkart and Amazon. Farmers will benefit from increasing demand. It can also boost overall consumer demand.

**Indian farmers can expect Better returns with speedy transportation And there should be some savings by cutting the long chain of middlemen and provide farmers improved market access.

Answer 2

3. Low prices, more variety
   The American giant Walmart, with huge experience in a first-world economy, will revolutionise Indian retail with low prices and a vast variety of consumer goods. Amazon’s fight-back will ensure that prices remain competitive.

Question 3

4. Finally, the projected rapid growth of the new version, going by their track record worldwide, should see a lot of direct and indirect job creation and

** the emergence of thousands of “service providers” — small and medium enterprises — to feed the big company.

**They will need myriad relationships; transporters, storage facilities, manufacturers, the entire value chain.

**Irrespective of any conditionalities of minimum local sourcing percentage, they would automatically want to procure from the domestic guys and in the process force them to compete with Chinese, Bangladeshi, Vietnamese and Korean suppliers.

Answer 3

5. Walmart will support small business and ‘Make in India,’ through direct procurement as well as increased opportunities for exports through global sourcing and eCommerce. Among other initiatives, Walmart will partner with Kirana owners and members to help modernize their retail practices and adopt digital payment technologies.
6. Check on wastage - Walmart claims to reduce food waste by improving waste management practices and investing in supply chains, especially cold storage.

Question 4

6. Check on wastage - Walmart claims to reduce food waste by improving waste management practices and investing in supply chains, especially cold storage.

Answer 4

Demerits :