US retail major to change shopping experience in country; traders see more woes
Bengaluru : The whopping $16-billion mega deal by global retail giant Walmart with the country’s leading e-tailer Flipkart for majority stake makes India an attractive destination for global majors in the digital space, industry experts said on Wednesday.
“The deal indicates attractiveness of India’s consumption market for global majors. With Walmart acquiring majority stake in Flipkart, we expect greater thrust on the online grocery segment,” rating agency Crisil Research Director Ajay Srinivasan said in a statement here.
“This is Rs 1 lakh crore all cash deal which is a perfect answer to those who were dismissive of Indian start-ups in an open-for-all market,” tweeted Paytm Founder Vijay Shekar Sharma.
Sharma expects online grocery to be the fastest growing segment in the e-retail space, growing at a 65-70 per cent compounded average growth rate (CAGR) to touch $100-billion in revenues by fiscal 2020. Biotechnology major Biocon Chairperson Kiran Mazumdar-Shaw said the deal was an endorsement for India’s first e-tailing company.
“It’s capital intensive business that needs deep pockets which Walmart has,” tweeted Shaw. Advisory firm Gartner director Adrian Lee said in a statement here: “We expect the status quo to remain within the year after the mega deal. It’s an extension of the $500-billion Walmart’s global expansion strategy.” Lee also expects the competition getting aggressive as Amazon counter-offered Walmart for a stake in Flipkart.
“Both have cash reserves and the outcome in the Indian sub-continent will determine the access to its growing middle-class consumers for dominance, outside the US,” Lee said. Cautioning consumers from expecting quick changes in the shopping experience because of the deal, Lee said user choice should be improved with more Walmart labels differentiating the merchandise. “Flipkart will diversify its inventory to attract more Indian consumer segments that haven’t started shopping online,” said Lee.
With a huge user base, India looms as an attractive market for retailers. It’s estimated that 15 per cent (200 million) consumers will shop online by this year-end. The deal will also benefit homegrown firms, as consumers are attuned and comfortable to shopping online with e-commerce marketplaces. “As e-commerce penetration remains low (15 per cent), I expect discounts and promotions to continue,” added Lee.
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Traders not so happy
New Delhi: Walmart’s acquisition of Flipkart faced opposition from traders and an RSS affiliate. The Confederation of All India Traders (CAIT) said the deal is nothing but a clear attempt to control and dominate the retail trade in India by Walmart through e-commerce in the long run. RSS-affiliate Swadeshi Jagran Manch alleged that Walmart was “circumventing” rules for a “back-door entry” into India and sought Prime Minister Narendra Modi’s intervention to safeguard “national interest”. “This will further eliminate small and medium businesses, small shops, and opportunity to create more jobs. Most of these small entrepreneurs are already battling for their existence; entry of Walmart will further create problems for them,” the co-convenor of the manch saidr. Retailers Association of India while staying away from commenting directly on the acquisition, said some e-commerce companies in India have been flouting FDI Policy for marketplaces. “Digitally powered 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 benefitted and not the country,” CAIT said. CAIT Secretary General Praveen Khandelwal said the government should frame a national policy for e-commerce and constitute a regulatory authority to regulate e-commerce business in India.
eBay looks to sell stake in Flipkart for $ 1.1 bn
NEW Delhi: US-based eBay on Wednesday said it plans to sell its stake in Flipkart for about $1.1 billion, and will relaunch eBay India focusing initially on cross border trade opportunity.
“eBay has notified Flipkart and Walmart that it intends to sell its holdings in Flipkart, which will represent gross proceeds of approximately $1.1 billion,” the eBay said.
Following the close of the transaction, eBay said it will also be ending the current strategic relationship with Flipkart, which includes unwinding commercial agreements with Flipkart and terminating Flipkart’s licence to use the eBay.in brand.
“We plan to relaunch eBay India with a differentiated offer to focus initially on the cross-border trade opportunity, which we believe is significant,” it said.
Walmart shares tank 4%
NEW YORK: Walmart shares slumped more than 4 per cent in the morning trade on Wednesday wiping off nearly $10 billion from its market capitalisation, hours after the retail giant announced $16 billion worth Flipkart deal.
The shares took a beating amid concerns that the deal could impact profits of Walmart.
The US major’s shares fell over 4 per cent on the New York Stock Exchange at around $82.13 apiece. At this level, the market capitalisation was more than $242 billion.
