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Effects of Liberalisation; Indian Retail FDI, e-commerce
News:
- Walmart is planning to buy a controlling stake of 77% in Flipkart, a home grown e-commerce company for a sum of $16 billion.
Important Facts:
- Rivals of Walmart and their footprint in India:
- Amazon: Just behind Flipkart in the share of Indian e-commerce.
- China’s Alibaba: Invested in Paytm Mall.
Reaction of various stakeholders:
- Traditional retailers: Willingness to consider strategic alliances with online rivals.
- Walmart investors: Consider this as an expensive bet as the firm will lose $8bn after the deal is finalised.
- Local trade lobbies: Determined to resist the deal.
- Analyst: Wondering how Walmart will turn around Flipkart’s losses.
- Status of Online Retail in India: It is heavily dependant on “discounts peddling”. For example, Flipkart accumulated losses upto Rs 24,000 crore.
- Walmart has had a difficult past in India. For example:
- Entered India in 2007, but exited the joint venture with the Bharti group.
- Restricted its operation to cash and carry stores after stricter FDI norms in the Multibrand Retail.
- Walmart is facing competition from Amazon in the US which is expanding to brick and mortar plus retail model. This is the apt time for it to enter India’s business-to-consumer segment.
- Indian policymakers should see how the US firm will integrate Indian suppliers into it international operations.
- This sector’s debate of big vs small and local vs foreign debate should be kept aside. A truly level playing field is required where all can compete despite of such deals in the future.
