Written By Athira Nair

Beyond tech and business, work culture is a matter of concern when it comes to integrating Flipkart with Walmart. How will this play out in the next couple of years? Walmart CEO Doug McMillon with Flipkart Co-Founder and Group CEO Binny Bansal On May 9, at the town hall to announce the acquisition of Flipkart by US retailer Walmart, Flipsters, as Flipkart employees call themselves, had one big question – would there be firings?

The concern was genuine as Walmart has a history of imposing policies on its acquisitions to results that are not always employee-friendly.

At the town hall, Flipkart Group CEO Binny Bansal was firm in assuring his team that there would be no firing of employees. In fact, he said there would be more hiring for new initiatives that were being planned.

Attending to the unasked question of Walmart setting the rules now, he had added that no processes (from Walmart) would be imposed on the team; but if they wanted to adapt any process from Walmart to Flipkart, they would be given the chance to do so.

After all, now on, Flipkart would be run as a retail company, not an internet company.

It is obvious that that beyond tech and business, work culture is a matter of concern when it comes to integrating Flipkart with Walmart. The former is India’s ecommerce leader, and the latter is the world’s biggest retailer. Flipkart’s entrepreneurial culture has always been its hallmark, as opposed to the 56-year-old titan from Arkansas, which follows a more traditional culture with set practices.

According to Kartik Hosanagar, Professor of Internet Commerce at The Wharton School of the University of Pennsylvania, it will be a mistake for Walmart to impose its culture on Flipkart. He believes Walmart will be eager to share its know-how and processes with Flipkart. “But Walmart has tested the waters in India previously, and other Asian markets and it recognises that these markets are different in many ways. If company culture is being dictated from the US, the Flipkart deal will fail,” he says.

Tips for successful integration

As the two giants join hands, choices made now will be critical in the long term. Of course, it will be a function of how, and how much, they integrate. Experts believe the impact will be visible only after a year or so.

“On the operations side, Walmart would not want to disturb anything immediately. It may cause Amazon to take a lead in business. Likewise, there may not be changes in the senior leadership immediately,” says Anuj Roy, Head of Digital Practice at global executive recruiting firm Transearch.

Kartik adds a significant example: When eBay acquired Chinese ecommerce company EachNet, it imposed its culture on the latter and also asked EachNet to drop its China product and switch to the eBay US product.

“eBay believed that they had a superior product in the US. eBay soon lost the China market to AliBaba. This has been a well-known lesson for US companies that believe that company culture or product design can be dictated from here. I think Walmart will let Flipkart’s product and tech teams remain independent, at least for the next several years,” he says.

He adds that where Walmart might leverage Flipkart will be in introducing some of its private label brands to Indian consumers through Flipkart, and also in opening offline stores using the Flipkart brand.

According to HR expert Saurabh Deshpande, the three things that will be most important to make the integration successful are:

1) Vision and purpose: Why did the deal happen? What is the vision for Flipkart moving forward? These need to be articulated and communicated, to energise employees.

2) Clarity: Clearly communicate the integration roadmap, how it will impact people. Listen to what team members have to say, address their questions and concerns.

3) Change agents: Identify team members on both sides (Walmart should leverage people from WM Labs as well) who will help drive the transition and change. Involve this group in the planning and execution.

Of course, integration without the wheels coming off the acquisition will not be easy.

According to TN Hari, HR Head at BigBasket and Strategic Advisor at The Fundamentum Partnership, the foundation of any successful integration in an M&A context is mutual respect for what the other brings to the table.

“In this context, Flipkart brings innovation and entrepreneurial zing while Walmart brings thoughtfulness and stability. Walmart could do with some entrepreneurial zing if it needs to adapt and stay relevant, while Flipkart could do with some deliberateness and process orientation,” he says.

Needless to say, efficient integration will bring benefits for both parties. “It is about making two sides leverage each other’s tech, domain expertise, and supply chain. It needs a pragmatic approach – pick the best from both players, what worked for them in their success,” says a former executive at Flipkart, on condition of anonymity.

Interdependencies and attrition

According to Devangshu Dutta, CEO at Third Eyesight management consultants, Walmart has a good sense of product development, sourcing, and supply chain. “Flipkart is big in commodities products like books, mobile, fashion etc and they operate well independently. But a sense of product management does not permeate Flipkart as they are a marketplace,” he says.

When Walmart, which has been waiting for more than a decade to enter Indian retail, finally gets a chance to play its next big game, the integration would create some well-intentioned and much-needed interdependencies.

But, according to Hari, not everyone at Flipkart (especially at the senior level) may like this, and may move on.

“That’s got nothing to do with Walmart, nor does it mean a failure in integration. It is just a reflection of such individuals not being able to adjust from being independent to becoming interdependent,” he says.

Anuj, of Transearch, believes a lot of people may cash out their ESOPs because of this. “Anyway, the incentives are limited. Some people at the VP level and above will cash out as there are no long-term incentives,” he says. Co-founder Sachin Bansal leaving itself is proof that when founders are not majority stakeholders in VC-driven companies, it is better to cash out to avoid management clashes. (It was earlier reported that Sachin’s exit was due to the limited control given to him under the new structure.)

He adds that Flipkart will try to retain key people who would not mind sticking around with Walmart (unless they are entrepreneurial). Many ex-Flipsters have gone on to establish themselves as entrepreneurs, an example being Bengaluru-based startup Udaan, which was launched by Sujeet Kumar, Amod Malviya and Vaibhav Gupta, all three of whom worked with Flipkart until a few years ago.

Hari Hari adds, “Over a period of time, Walmart would certainly bring in elements of culture that they deeply value. After all, it is these elements of culture that have made them what they are today. Any M&A always results in some attrition at mid to senior management levels. This attrition isn’t really bad. It is natural selection. Those that fit in best and adapt would continue. The others would find new homes.”

He reiterates that while the Flipkart CEO will report to an executive at Walmart, the rest of the Flipkart management team should be insulated from the functions at Walmart for a period of 12 months.

“After 12 months, some cross-reporting relationships could be introduced. Some FK leaders should be given leadership roles in the combined entity, or in the larger Walmart organisation,” he says.

Flipkart’s extravagance, Walmart’s austerity

Consistently efficient operation is Walmart’s key to offering low prices to the customers. In fact, its Every-Day-Low-Pricing (EDLP) strategy is a result of efficient methods in sourcing, supply chain, and front-end operations. The company has the same motto internally as well.

While Flipkart likes its luxuries, be it swanky offices or huge pay packages to fresh graduates, Walmart executives still fly economy class. It has only been a few months since Walmart made its minimum wage $11 per hour, following protests about the meagre pay to its employees.

Anuj says there will be some tightening of the purse strings as Walmart wants to grow Flipkart for an IPO. “Walmart will be more focused on where they invest in. It (their investments) will be more thought through,” he says.

Kartik Hosanagar For the new entity, Kartik is positive that compensation and payroll expense will be under supervision from Walmart. “But they will also be cognizant of the need for pay to be competitive with that of Amazon,” he says. Sources inside Flipkart tell YourStory that new processes in finances are already on the way. According to one person aware of the developments, there is strong synergy with the US team in putting more processes in place, like revamping the appraisal system.

An ex-employee at Walmart Labs, on condition of anonymity, says that although the retail side of the American company is known for its frugality, the tech employer is a paymaster at par with Amazon or ZoomCar.

“Senior directors in the company, both tech and retail, are mostly those who have been with the company for 20-25 years. One of them was a trolley boy at Walmart retail, who learnt new skills and rose in the company.”

Saurabh agrees that Walmart has already shown the willingness to adapt. “Walmart Labs in Bengaluru has been able to attract and retain some great technical talent including people from successful Indian startups,” he points out.

Tradition meets startup culture

The ex-employee from Walmart Labs says attrition rate was high at Walmart Labs as things were “slow-moving.” He says the pay is high at Walmart for the best talent, since it is a legacy company. “But it has defined processes, and any change will need permission from multiple levels. It is not intellectually satisfying. The company has a traditional mindset and low-risk appetite.”

These sentiments are echoed by another Walmart (retail) executive in the US, who says that since Walmart is a huge company, its pace of innovation is not as fast as smaller companies. “While it cannot run as a startup, you can do 100 things in one month,” says the ex-employee at Walmart Labs, adding that Walmart also offers a clear work-life balance. “Everyone leaves the office at 6 pm. If you are staying late, especially women, you have to get the manager’s approval,” the former employee says.

On the other hand, startups often tend to have a toxic work culture with crazy work hours as a result of poor planning, a total lack of work-life balance, the tendency to turn a blind eye to harassment of all kinds, and an unmitigated bro culture. Thus, according to Hari, some of the changes that Walmart would introduce would be welcomed by employees.

After Walmart’s acquisition of US ecommerce portal Jet.com, reports had surfaced that the latter’s startup culture took a hit, with Walmart banning alcohol consumption, and even cursing in office.

Hari believes senior-level executives at Walmart would not embrace the startup culture of Flipkart. “My sense is Flipkart, in three to five years, would become indistinguishable from the rest of Walmart,” he says, adding that cultures are what founders and companies create. “In terms of culture, companies founded by millennials are likely to be very different from companies founded by, say baby boomers,” Hari opines.

However, Saurabh believes culture is never static. “It is like a living, evolving set of behaviours and actions. So, in that sense, these two cultures (traditional corporate vs millennial) that we perceive as opposite ends of the spectrum are actually evolving, at some converging point along the spectrum. At what side of the spectrum will the convergence point be is something that varies with company and industry,” he says.

If Walmart-Flipkart integration works out without too many headaches for the human resources team, a new story in work culture may begin now.

Written By Writankar Mukherjee, ET Bureau

The entry of online smartphone brands Xiaomi and Motorola into offline helped Mukesh Ambani’s consumer electronics and smartphone retailing business, Reliance Digital, enter the $2-billion league.

According to two senior industry executives aware of the details, the business grew by 31% to reach Rs 15,100 crore, or about $2.3 billion, in the year ended March 2018 from Rs 11,480 crore in 2016-17.

This performance excludes sales of Reliance Jio connections and recharges, which are done by Reliance Digital and smaller format Jio Stores that are part of the same business.

While Reliance attributed the growth to “focused assortment and bringing online brands offline like Xiaomi and Moto (Motorola)” in an investor presentation of its Q4 earnings announced last Friday, industry analysts said competitive pricing and offers at par with top online marketplaces, Flipkart and Amazon, have driven sales at Reliance Digital.

The company said its electronics retailing business continues to “outpace market growth across key product categories”.

The business has more than 220 large format Reliance Digital stores and over 1,800 smaller format neighbourhood Jio stores, which also sell smartphones and do catalogue sales of television and appliances.

With this, Reliance Digital is more than four times the size of its nearest rival, Croma chain of the Tata Group.

While Croma’s financial performance for FY18 is yet to be declared, the business had clocked Rs 3,268 crore sales in 2016-17 as per latest regulatory filings to the Registrar of Companies. Reliance Digital had raced past Croma in sales in 2014-15.

The earnings release and presentation did not reveal the annualised revenue break-up of the consumer electronics retailing busines

Emailed queries sent to Reliance Retail on Saturday remained unanswered till Monday press time.

An industry executive said Reliance Digital has been able to grow despite the return of deep online discounts in categories like smartphones and television during the last festive season and the introduction of the single levy goods and services tax (GST), which had impacted the industry.

“Reliance Digital has grown not just in smartphones, but also in TVs and appliances, including its private label Reconnect. The revenue also includes the service business, which is currently small with 70 service centres but is poised to become a major driver going forward,” he said.

Devangshu Dutta, CEO at Third Eyesight, a retail and consumer goods consulting company, said while margins are low in consumer electronics and smartphone segment, Reliance Retail is pushing volume sales, which would then make sense of margins in aggregate.“ For Reliance, the consumer electronics retailing business is quite strategic in pushing sales of digital devices like smartphones, connected TVs and appliances which in turn will drive Jio data consumption,” he said.

Reliance Digital had become the largest contributor to Reliance Retail revenues in 2016-17, accounting for 34% of overall business by overtaking the grocery segment. It is also the country’s largest retailer of smartphones, televisions and white goods.

Source: economictimes

Written By Maulik Vyas

The 25,000-sq. ft Vama Departmental Store at Cumbala Hill is located in the same complex as Kanchanjunga—designed by architect Charles Correa—and a bungalow ‘Bella Vista’. Photo: Abhijit Bhatlekar/Mint

Mumbai: Vama, South Mumbai’s apparel store for the well-heeled, has landed in bankruptcy court, as Italy’s Gas Jeans tries to recover unpaid dues under the Insolvency and Bankruptcy Code (IBC).

In the case originally filed in Bombay high court in 2015, Gas Jeans Pvt. Ltd, the Indian unit of the Italian company, has claimed dues of Rs22 lakh. After the enactment of the Insolvency and Bankruptcy Code, the case was transferred to the National Company Law Tribunal (NCLT).

The 25,000-sq. ft Vama Departmental Store at Cumbala Hill is located in the same complex as Kanchanjunga—one of the city’s landmarks designed by noted architect Charles Correa—and a bungalow ‘Bella Vista’. All three properties are owned by the family of late businessman Parmanand Patel, and are under ownership dispute for over a decade.

The amount may be small, but the state of Vama also points to declining footfalls and loss of sales at South Mumbai’s retail stores to swanky malls in the city’s redeveloped mill areas and suburbs.

“Vama was directed to produce its ledgers in the tribunal (NCLT) but instead of that, they have just mentioned a few details in a simple statement,” Vipul Shukla, counsel for Gas Jeans argued before the tribunal on 8 May. “We have suggested the name for an appointment of interim resolution professional (IRP) as well.”

Suvarna Joshi, counsel representing Vama, claimed that Gas Jeans was seeking to recover around Rs22 lakh, but the actual dues were only Rs6 lakh.

If NCLT admits the petition, an IRP will be appointed and the resolution process will begin, with set deadlines for resolution and liquidation. NCLT presiding officer M.K. Shrawat has reserved the matter for an order.

Email queries to Vama as well as Gas Jeans were not answered till press time.

Much before the malls made their mark and foreign brands entered through joint ventures, Vama was selling brands such as Calvin Klein, GAS and Benetton and products from Indian designers such as J.J. Valaya, making it a sought-after destination for wealthy, brand-conscious shoppers.

Devangshu Dutta, founder and chief executive at consultancy firm Third Eyesight said, “Upwardly mobile population has increased many fold in the last 10 to 15 years, and they often choose shopping malls over standalone department stores.”

“At one point in time, places like Amarsons or Benzer were the go-to place for major brands and people came from even out of Mumbai to shop there. While they are not such exclusive and strong draws anymore, those stores have also evolved and they know their target customers well; so, they managed to stay relevant with changes in the market,” adds Dutta.

In the changing the landscape of the Maximum City, old-world shopping centres are reinventing to stay relevant with new-generation shopping malls and e-commerce sites. One of them is Akbarallys in South Mumbai, which now caters exclusively to men with the launch of ‘Akbarallys Men’. The store, which is around 120-years-old, has gone from being a department store to a multi-brand men’s apparel store in 2015.

“As the city evolved and grew, there was an emergence of multiple micro-cities, each with its own layers of the growth cycle, demographics, and cultural shifts. Plus, infrastructure which includes shopping & retail also has evolved, especially in the newer suburbs that offer better planning, space and convenience that cater well to the evolved buyers & sellers alike,” said Tina Jain Mehta, CEO of boutique branding and design firm Pineapple Consulting, “thus reducing the effort of travelling & creating ‘next door’ opportunities which translate into lesser footfalls and reduced sale in South Mumbai.”

Source: livemint

Written By Chaitali Chakravarty & Rasul Bailay, ET Bureau

NEW DELHI: Even after acquiring India’s largest ecommerce company Flipkart, Walmart will stay away from applying to invest in a food-only retailing venture in the immediate future that will allow the US giant to stock and sell groceries directly to consumers through the online platform.

Walmart would rather have a presence in the food products market through third-party retailers on Flipkart and escape the scrutiny and riders associated with foreign direct investment of up to 100% in food-only retailing ventures, according to sources.

“It doesn’t make sense to sell only food either through brick-and-mortar or through online,” said a person familiar with Walmart’s plans. “With all those riders, it is even harder to do it.” Walmart’s strategy is in contrast to arch rival Amazon, which received government approval last year for a fully owned food retailing subsidiary that the Seattle-based ecommerce behemoth is yet to start. Amazon’s plans hit a hurdle after the government asked it to keep separate equipment, machinery and warehouses for the food products business and not to mix or share anything with its flagship marketplace business Amazon.in.

Walmart has always maintained that a food-only brick-and-mortar venture doesn’t make business sense because of the wafer-thin margins.

“Walmart would rather handle the back-end of the food and grocery and that will help it escape the scrutiny and riders associated with food FDI retailing,” the source said.

A spokesperson for Walmart declined to comment.

A company like Walmart is not in a rush because it is in India for the long term, according to Devangshu Dutta , chief executive officer of retail consultant Third Eyesight.

“They are looking at India as a longterm game — if it may not happen now, it will happen two years down the line when the regulations become friendly,” he said. “If you are in for the long haul, you are not in a rush as the window of opportunity is not closing.”

India created the food-retailing segment in 2016, allowing full ownership by overseas companies in ventures that could sell locally produced and packaged food items through offline and online channels. However, it set riders for applicants such as keeping logistics, manpower, accounting and offices, among others, at arm’s length from their existing ecommerce marketplaces. India also permits 100% foreign capital in online marketplaces, which can only be offered as platforms for other vendors and retailers to do business.

The government had banked on global retail giants such as Walmart and Tesco to lap up the new investment opportunity in food retailing, especially after the 2012 policy allowing 51% FDI in multibrand retailing remained a virtual nonstarter due to stiff riders.

While most global bigwigs shied away from investing in the high-profile foodonly retail ventures, Amazon appeared as a saviour in February last year, when it applied to invest $500 million through this route.

Amazon has now sought a clarification from the Department of Industrial Policy and Promotion on whether it can share some of its warehouse staff, entry and exit doors at warehouses, barcode machines, trollies, pallets and other logistical paraphernalia for its food-only venture with the existing infrastructure of Amazon.in, ET reported in April.

It has also asked the department if it can maintain the segregation “virtually.”

A top foreign retail consultant said Walmart would rather wait until India allows such ventures to sell non-food items like soaps, toothpastes and personal care items to make the business viable for store operators.

Source: economictimes

Written By Sharmila Das

New Delhi: India focused private equity firm Samara Capital plans to buy Aditya Birla Retail’s (ABRL) supermarket chain, More, for about Rs 2,500 crore. The PE firm is in advanced talk to complete the deal; a few industry experts with knowledge of the matter said this today.

As per the experts, primarily the group wants to sell its supermarket chain to reinvest the amount in Aditya Birla Fashion and Retail (ABFRL) to maintain its dominant position in the category. Also, because food and grocery is a low margin business, the group wants to shift focus on fashion category where it has Pantaloons Fashion and Retail (PFRL) and Madura Fashion & Lifestyle (MFL).

In May 2015, Aditya Birla Fashion and Retail Ltd (ABFRL) consolidated Aditya Birla Group comprising ABNL’S Madura Fashion division and ABNL’s subsidiaries Pantaloons Fashion and Retail (PFRL) along with Madura Fashion & Lifestyle (MFL). After that, PFRL was renamed as Aditya Birla Fashion and Retail Ltd.

“This consolidation will create India’s largest pure-play Fashion and Lifestyle Company with a strong bouquet of leading fashion brands and retail formats. This move brings India’s #1 branded menswear and womenswear players together,” Kumar Mangalam Birla, Chairman, Aditya Birla Group quoted saying then on the consolidation.

In 2007, Aditya Birla entered into food and grocery retail sectors with its acquisition of Trinethra Super Retail and thereafter expanded its presence across the country under the brand ‘More’ with two formats ― Supermarkets and Hypermarkets. However, as per experts, these acquisitions did not suit the company and hence now it is looking at further consolidation.

“In food and grocery scalability is huge but margins are thin. The Aditya Birla has been looking at selling the food and grocery retail operations for a while – the business had a debt overhanging from the acquisitions (Trinethra+Fabmall initially, and more recently Total), which kept dragging it down. The group’s other retail business, Aditya Birla Fashion and Retail (ABFRL), also is cash-hungry but potentially has better margin prospects, and it is one where the group is a market leader in the country. A divestment of More could free up cash for the group for reinvesting in ABFRL to grow and consolidate its leadership position,’’ said Devangshu Dutta, Chief Executive at consultancy firm Third Eyesight.

According to ET report, the private equity firm has almost completed its due diligence with Aditya Birla Retail.

Email sent to both Aditya Birla Retail and Samara Capital remained unanswered till the time of filing of the report.

Source: indianretailer