The battle to acquire India’s Online retail firm Flipkart has intensified with its rival Amazon looking to conquer the major space of India’s online retail segment. Amazon’s move is seen as a counter to stall another retail giant Walmart’s entry into the Indian retail space.
According to recent reports, Walmart has concluded the due diligence procedures to acquire 51% stake in the firm. Walmart plans to bring in 10 to 12 billion dollars to acquire hold on Flipkart’s secondary shares. Flipkart looks to cut this deal through for 20 to 22 billion dollars. But, this undervalued bid by Walmart has given space for Amazon to step in and initiate talks with Flipkart.
Flipkart’s legacy in the online retail segment
Flipkart took the Indian retail sphere by storm by rolling out its online retail platform a decade ago. Similar to the history of Amazon, two former Amazon Employees Sachin Bansal and Binny Bansal forayed its startup into the unexplored Indian space as an online bookseller in 2007. Unhindered by its humble beginning, Flipkart grew leaps and bounds by setting its tentacles across all market segments. Customer base increased day by day as Flipkart chose to excite its customers with exciting discounts, cash on delivery option, easy returns, and finest consumer service.
With its finely built lightweight UI, Flipkart grew as a billion-dollar company by overpowering its rivals and holding its happy customers at its disposal. Flipkart’s big billion days, a contemporary to Amazon’s Black Friday Sale invited millions of customer to purchase products at crazy prices. Things went on in Flipkart’s favor till well-experienced US-based retail giant invaded India with its strong infrastructure and hefty funding. Amazon’s strategically eroded Flipkart’s customer base and hampered the growth of Amazon. Even in midst of these ordeals, Flipkart continued to its reign as India’s most valuable Internet startup and remains a massive player in India’s online retail market.
Flipkart: Acquisition & Funding history
Flipkart also has recorded its name in huge acquisition ledgers, when it acquired online fashion retailer Myntra in 2014 and another similar retailer in 2016. Other big acquisition pillage of Flipkart include LetsBuy.com and PhonePe. Minor merger and acquisitions of WeRead (a social book discovery tool similar to GoodReads) and Mime360 (an online content platform firm) was done in the yesteryears. Even it had talks with Snapdeal for the merger, but the hefty sum demanded in comparison with the sum quoted didn’t stall the deal to go through.
Morgan Staley valued Flipkart to be a $200 billion company in a decade. Recently, it received funding from Japan’s SoftBank of $2.5 billion apart from its existing investors like Tiger Global, Naspers, Accel Partners, Morgan Staley Wealth Management and also Microsoft Corp.
With the abundant valuation of Flipkart in its retail space, it is obvious to see the intense battle between Walmart and Amazon to bring the billion-dollar Flipkart under its umbrella.
A look into Amazon-Flipkart Coupling
Though it has been rumored for years about Amazon-Flipkart merger, tangential talks have brought the rumor to reality. If unification of Amazon-Flipkart takes place, Amazon will become the indestructible Lion of India’s online retail space by holding 80% of the influential Indian online retail market.
But, Amazon may receive the red flag from the Competition Commission of India (CCI). The retail industry in fear of them getting killed along the way in the e-commerce market game may take it up with anti-trust regulator Competition Commission of India, who in turn has to give approval on the deal to go through. But, the history of CCI’s approval in the past year will strengthen Amazon’s hope of clinching Flipkart as it has cleared all files in favor of the big players.
Though this deal will have a very little impact on the end customer, it will have a destructive impact on the other retail players, who will unanimously object the deal to go through. Already online retail players have crushed the significant market space of offline retailers. But, this deal will severely hit both the online and offline retailers as a whole.
While fear on Amazon-Flipkart deal continues to haunt few retail members, it is important to notice that Amazon and Flipkart talks have just commenced and Flipkart, if it chooses to preserve its heritage in the Indian market, may turn down the deal in fear of legacy getting crushed by its current contender. But, if legacy does not stop Flipkart from making the deal, then it will expect a deal as good as Walmart’s.
Also, the absence of competition after the merger may tyrannize Amazon to give not so good deals. But, things will be different if the deal goes through the contrary way, where big discount competition will go in the favor of the customers.
A look into Walmart-Flipkart deal
On the other hand, Walmart a leading player and contender for Amazon in the US ground looks to cut through the deal by making the biggest investment in its retail segment. Walmart’s invasion of India will bring similar kind of retail wars like in the US. While it remains to be the largest retailer in the world, it has been working persistently to strengthen its domination in the retail world. Since its acquisition of Jet.com two years before for 3 billion dollars, the Flipkart-Walmart deal seems to be the biggest for Walmart. Walmart’s Indian presence will increase its strong foothold in the global retail space in addition to its establishment in most coveted Indian retail market.
Walmart has a history of arrears in the Indian retail market. Walmart was in talks with the Indian Government to establish an open market for Foreign Direct Investment. Its aggressive plan to invade Indian market failed profusely with the opposition party raising the red flag for the world’s largest retailer to enter India in offline mode. Because of this, a joint venture between Bharathi Enterprises and Walmart did not take off. The history of initial failure may not haunt Walmart as it tries to enter the Indian space with the acquisition of Flipkart.
Flipkart’s rich heritage in India’s online retail market will continue if it agrees to do merger transaction with Walmart. Also, heavy competition stirred with respect to Amazon will be a boon for the customers with another resilient big player in the Indian retail segment.
The Clash of Titans for Flipkart
It’s a great thing to note that big US retail players are battling for a startup that was started just a decade ago. With the huge market presence, Flipkart has built, clinching the deal will be a phenomenon of prestige for both the firms.
This battle does not seem to be a long war and we have only a few weeks to see the result. Whether it is a scaled up Amazon or a new entrant Walmart, it is thrilling to note that India’s immense consumer Internet space has lured big players to make investments in India. These investments could bolster Indian economy and it will be a jackpot for Indian customers as well.