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Walmart buys Flipkart in largest ever E-commerce deal

11 May, 2018, 04:41 | Author: Kristi Dunn
  • Amazon founder Jeff Bezos has committed investments to the tune of $5 billion for the Indian market

When contacted, Amazon India spokesperson said: "As India?s fastest growing e-commerce player with a long-term commitment to make e-commerce a habit for Indian customers, we continue to invest in the necessary technology and infrastructure to grow the entire ecosystem".

Walmart has been attempting to enter the Indian retail market for more than 15 years but the government's regulation of not allowing Foreign Direct Investment (FDI) into multi-brand retail proved as a hindrance for the U.S. retail giant.

"We are delighted and humbled by the trust from our customers, to lead in India on things that matter to our customers in five years of our business, while continuing to launch innovative India-first initiatives as well as completely new offerings like Echo, Prime, Prime Video and Prime Music", the spokesperson added. "And it fits right in with our strategy", Judith McKenna, Walmart's global chief executive officer, said in a phone interview. Flipkart co-founder Binny Bansal and other shareholders will hold the remainder. The deal will shave 25 cents to 30 cents per share from this year's earnings, with that impact doubling the following year. Fashion was the only category in which Flipkart maintained a significant edge. Walmart once envisioned operating hundreds of locations across India but it has been unable to open traditional units because of long-standing governmental rules for so-called multibrand worldwide retailers. Last year, according to figures released by Forrester, the online retail market in the country grossed up US$21 billion.

In terms of marketing after the deal, Ethan Chernofsky of market intelligence company SimilarWeb believes that the brand value is the key part of the deal and Walmart's entry into the market could give Flipkart a boost in their non-branded search strategy. India is the next big potential prize for global retailers after the U.S. and China, where foreign retailers have made little progress against Alibaba Group Holding.

"India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of e-commerce in the market", Walmart president Doug McMillon said.

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Cautioning consumers from expecting quick changes in the shopping experience because of the deal, Lee said user choice should be improved with more Walmart labels differentiating the merchandise.

Last month, the company agreed to cede control of its United Kingdom grocery chain, Asda, merging it with British rival J Sainsbury Plc.

In an interesting twist, this time Walmart is snapping up a company started by none other than two former Amazon employees. Flipkart has 34 per cent market share while Amazon controls 27 per cent of Indias online sales.

Although Flipkart has been suffering losses, they have managed to draw in some huge investors like Softbank, Tencent and Microsoft.

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