Online retail flip

Online retail flip

Effects of Liberalisation; Indian Retail FDI, e-commerce

News:

1. 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:

2. 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.

5. Status of Online Retail in India: It is heavily dependant on “discounts peddling”. For example, Flipkart accumulated losses upto Rs 24,000 crore.
6. 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.

7. 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.
8. Indian policymakers should see how the US firm will integrate Indian suppliers into it international operations.
9. 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.