MUMBAI: India’s e-commerce sector faces yet another shake-up as US retail giant Walmart prepares to take a majority stake in Flipkart, a move that is expected to presage a move into online grocery sales where US rival Amazon is already a player and where local operators like BigBasket and Grofers are developing their offer.
Sources close to the deal indicated to the Financial Times that Walmart will pay some $15bn to take a stake of around 75% in Flipkart, which was set up in 2007 by two former Amazon workers.
Walmart’s strategy will likely involve shifting Flipkart’s current focus on consumer durables and clothing – the former category in particular is not growing as fast as previously – towards food and groceries.
Amazon signalled its intent last year to expand its food operations after the Indian government relaxed foreign direct investment rules. And in December, Chinese giant Alibaba took a stake in Big Basket.
Now BigBasket is reported to be talking to investors as it readies itself for an extended battle with its US rivals in the online grocery sector.
“It’s not like BigBasket is scared of the prospect of battling Amazon and Flipkart-Walmart,” a source told Mint. “But they recognize that with Walmart’s entry, this will be a long-drawn-out battle against even deeper-pocketed rivals and that it needs to have a big enough war chest to have a reasonable shot at maintaining its leadership position.”
Mint also noted that BigBasket is expanding with a number of new initiatives, such as launching offline stores and kiosks and a subscription service.
Grofers recently raised R4bn from investors but Albinder Dhindsa, CEO and co-founder, believes “the retail market is big enough to accommodate multiple players and we are all still quite small compared to the available market.
“Even for bigger e-commerce giants, their existing (distribution) scale doesn’t make much difference because the supply chain required for grocery is completely different,” he told the Business Standard last month.
Satish Meena, a Delhi-based analyst with Forrester, noted last year that there are particular logistical issues around grocery delivery.
“The biggest challenge in India is the heat and we don’t have a large number of refrigerated vans in the market,” he said.
Sourced from Mint, Business Standard, Financial Times; additional content by WARC staff