How Flipkart acquisition by Walmart would impact status quo of Indian e-commerce

Flipkart
Image creditFlipkart

Flipkart acquisition by Walmart gives a sense of pride to every Indian and enhances the faith in the country’s startup movement. Holding the baton on a behest of the entire startup ecosystem for more than a decade, Flipkart has fairly surpassed the expectation of many observers, analysts, media as well as cynics.

With a staggering $16 billion buyout, Flipkart is no more a startup. While who will fill the Flipkart void is an altogether different topic, the moot question is – how this tectonic shift will impact the e-commerce ecosystem?

Let’s talk about online shoppers first. In fact, nothing will change for consumers. They will continue to enjoy discounts, cashbacks and freebies as Walmart (via its subsidiary Flipkart) and Amazon would keep burning capital to outrun each other.

What would change for Flipkart after Walmart acquisition? Flipkart has surpassed the startup phase and it would certainly shed startup culture and mindset to become more corporate. Of course, the acquisition also solves the permanent headache of raising capital.

Meanwhile, merchants who import goods from China, Vietnam and other SEA countries to sell on Flipkart will be impacted heavily. Walmart has championed the sourcing capabilities from China and Vietnam. No local merchants (irrespective of size) will even come close to Walmart penetration across supply chain funnel in these countries.

Interestingly, a large number of the Indian e-commerce volume is driven by categories including smartphones, electronics, accessories and western fashion. A majority of supply in these categories come from China and Vietnam. Thus, merchants who have been sourcing from these countries will have a tough time.

Besides consumers and merchants, the deal also heralds extension of a decades-old fight between two American companies now on a foreign soil – India. Amazon has given deep wounds to Walmart by cannibalising its dominance in the retail segment in the US.

While Amazon still has a superior technology, operational set-up and strategy in e-commerce than the retail conglomerate on local turf, with Flipkart in its kitty, Walmart has scored a little advantage on the Jeff Bezos-led company.

In the present scenario, Flipkart commands more market share than Amazon in the country. Walmart would leave no stone unturned to maintain the lead.

Third front in Indian e-commerce = SoftBank + Alibaba

Last but not the least, let’s look at the third front in the Indian e-commerce space and how Walmart-Flipkart deal will influence it. The so-called third front comprises Paytm Mall, Snapdeal, and ShopClues.

While Snapdeal had been written-off by analysts, media as well as its prime backer – SoftBank, it’s still in the game with its 2.0 avatar. ShopClues seems to have lost the plot and gradually losing number 3 spot.

Paytm Mall is relatively very young with very small scale as compared to Flipkart and Amazon.

When we zoom in on the third front – it’s actually all about Alibaba and SoftBank. Together, they own a large part of Paytm Mall while SoftBank has a majority share in Snapdeal. With having about 10 investments in the country and a fair share of failure, SoftBank has just tested success via Flipkart exit in India.

Along with Alibaba, SoftBank is set to back potential companies in the third front, essentially, Paytm Mall and Snapdeal. Masayoshi Son won’t mind backing the Amit Sinha and Kunal Bahl-led companies. At least, SoftBank investment in Flipkart proved that Son wouldn’t hesitate in changing sides.

Lesson from Flipkart: With conviction, one can fight & challenge mighty

Amazon has been unbeatable in the US. Actually, so far every attempt (except China) to pose a serious threat has been easily neutralized by Bezos and his gang. Even Walmart’s past attempts to impact its dominance in the US e-commerce market failed miserably.

However, Flipkart is the only company to resist Amazon’s supremacy. Despite being young and inexperienced (as compared to Amazon), Flipkart has shown the world that mighty and deep pocket can be fought on fundamentals, tenacity, right culture and vision.

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