Putting months of gossip to an end! American retail major Walmart confirmed that it would be acquiring a substantial stake in Indian e-commerce major, Flipkart Group which is currently operating to sell 8 million products across 80-plus categories on its online portal.

While reports of the deal have been surfacing time and again in the recent past, the American multinational announced that it would acquire 77 per cent stake in Flipkart against an initial payment of USD 16 billion (over 1 lakh crore). The deal values the 11-year old Indian e-commerce firm at $20.8 billion.

The deal, which will see co-founder Sachin Bansal and investor Japan’s SoftBankexit completely, will now pit US-based giants Walmart and Amazon in the Indian market.

As per Walmart, India’s e-commerce industry is projected to grow four times faster than total retail through 2023, with a millennial population of 443 million and a growing middle class.

With the deal in place, Walmart aims to serve customers, support job creation, small businesses, farmers, and women entrepreneurs, while backing Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future.

The deal is going to shake things up. The world’s biggest retail deal will impact the whole segment, the competitors and the consumers. Here’s how it pans out.

Key Facts & Figures

Walmart has been trying to enter India for years and came into operations in 2009 through a joint venture with Bharti Enterprises and later took full control of the venture in 2013. Strict FDI rules has kept its presence limited to just the cash-and-carry segment. It currently operates about 20 wholesale stores in the country which serves small businesses.
India’s first billion-dollar e-commerce company, Flipkart, sells 8 million products across 80-plus categories. It has 100 million registered users.
According to a statistical data from market analyst Forrester, the Indian online retail market generated USD $20 bn (£14.77 bn) last year and accounted for just 2.4% of the country’s overall retail industry. By 2022, the local online retail market is expected to hit USD $73 bn (£53.92 bn).
According to global financial services company, Morgan Stanley, India’s e-commerce market is tipped to grow to $200 billion in a decade due to the availability of inexpensive mobile data, making online shopping more accessible.

Challenging Ally

Flipkart is being positioned as the arrowhead for Walmart to have another crack at the Indian market, four years after it broke its joint venture with Bharti for a cash-and-carry business. This time around, Walmart’s choice in India is starkly different. While Flipkart has absorbed billions of dollars of investor money to rapidly grow its business, its main bait has been deep discounts. Walmart’s investment would give Flipkart not just additional funds to fight Amazon, but also arm it with a formidable ally with extensive experience in retailing, logistics and supply chain management.

Globally, Amazon and Flipkart have been rivals and the deal extends it to India. Amazon is a big market for India and has been giving a tough run for its money to Flipkart in the last few years.Walmart, on the other hand, has been present in the country for years but hasn’t made any significant headway. The acquisition of Flipkart is set to heat up the rivalry between the two retail giants.

While Amazon did make a late push to buy Flipkart, the acquisition was never going to happen for multiple reasons. However, Amazon has been making investments in companies – including BankBazaar, gifting platform Qwikcilver – but never made a big acquisition.Now with deeper pockets courtesy, Walmart and Amazon will face tougher competition. Although Amazon has more sellers (300,000) as compared to Flipkart (100,000), Walmart will bring in its years of retail expertise and Walmart-Flipkart deal might just spur the Jeff Bezos-led company to do acquisitions.

On the other hand, war between an empowered Flipkart and Amazon will shrink the space for smaller players because it will ensure that prices, quality and delivery remain highly competitive.

Online sellers nervous
Online sellers are jittery because Walmart can wipe them off. Walmart, a $500 billion American behemoth, has a reputation of killing small businesses with ultra-low prices. They fear that Walmart might bring in its own private labels via Flipkart to the Indian consumers, adding to competitive pressures.

THE IMPACT –
Low prices, more variety
The American giant Walmart, with huge experience in a first-world economy, will revolutionize Indian retail with low prices and a vast variety of consumer goods. Amazon’s fight-back will ensure that prices remain competitive.

The entry of Walmart in e-commerce space will also provide access to online consumers to browse through and shop from variety of international brands.

More sales, better discounts

For the consumers, it’s a real big bonanza!The intensifying competition between the giants will bring better deals, sales and offers to bring back the golden days of Big Billion or The Great Indian Sale which consumers used to enjoy so much.

Saved from monopoly

Amazon had reportedly offered to buy a stake in Flipkart before Walmart announced its own pact with the company, a deal which was expected to close later this year. Although there was a little chance of Amazon buying Flipkart, if the deal had gone through then the former would’ve enjoyed a near monopoly in the market. In the long-run, it would’ve meant not a good deal for the consumers as the deal won’t have bombarded them with the variety which Flipkart-Walmart deal seems to promise and deliver.

Better service, faster delivery

In terms of services, online buyers stand to get better options and even faster delivery of products. Consumers will get better-managed deliveries given the increase in investment in supply chain and infrastructure. This will also translate to the availability of products in Kirana stores, which implies better pricing, quicker deliveries, and overall better service levels.

Acknowledging this change, Amazon has changed their game too – for its Prime members at least – by offering one-day delivery for a large number of the products it sells.

Analysts reckon it’s better to wait and watch how Walmart decides to function once the deal crosses the finishing line by the end of 2018.