US retailer Walmart is planning to repeat the food retail US-success formula in India through home-grown marketplace Flipkart.
It is aggressively looking to tap the food retail market, which is expected to be $800 million markets in four years, through physical stores.
Since foreign direct investment (FDI) is allowed 100% in food retail, the company wants to build on it via the Indian marketplace route. The move will also boost Walmart cash and carry business.
Walmart has over 50% of sales coming from food business and Flipkart’s offline stores fit in their whole scheme of things, said sources close to the development to TOI.
The Walmart CEO and other key officials visited India offices of Flipkart recently and were very positive about the future prospects.
Last month Flipkart group CEO Kalyan Krishnamurthy in an interview had said that Flipkart may pilot its fresh foods business. The contribution of fresh fruits and vegetables to the total grocery market in India is still not that big; we will experiment for fruits and vegetables as we grow, he had said.
Recently, it has opened an online grocery store in Mumbai. Flipkart is also in talks to buy Indian grocery chain Namdhari’s Fresh, a retailer of fruits, vegetables and staples with an international presence.
In India, Walmart is only allowed to operate a business-to-business (B2B) wholesale segment due to FDI regulations. The recent FDI norms outlined by the government played a spoilsport in Walmart’s plan to use Flipkart to maximum advantage to cross-sell their private brands.
In May last year, Walmart has acquired Flipkart for over $16 billion. The move is an effort to remain ahead of its rivals in the food retail business.
Amazon, via Amazon Retail India, has already committed investment of $500 million in food retail. Last month, it has got Rs 240 crore fresh capital infusion from its parent entity.
Besides, Amazon holds stakes in Aditya Birla Group’s food and grocery retail chain, More and it is in advance stage to acquire a stake in Kishore Biyani-led Future Retail, which runs Easy Day and Big Bazaar chain of stores. Kishore Biyani-led Future Group has also reportedly started listing its brands and products on Amazon.
There are also incumbents like Bigbasket and Grofers, who have been backed by heavyweights like Alibaba and Softbank. Both the players currently hold together over 65% of the market share. Last week, Grofers got $200 million investment from Softbank and Tiger Global.
The food space, which accounts for two-thirds of India’s overall retail market, is also about to witness Reliance full fledge entry. The food and grocery segment is expected to be the fastest growing segments in the upcoming years in India. With the competiton rising every passing year, it will be consumers who will get maximum benefit out of it.