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April 25, 2018
Written By Athira Nair
How will the synergy between India’s largest unicorn Flipkart and US retail giant Walmart benefit both parties beyond the obvious goals?
Much has been said about Walmart’s purchase of Flipkart, but let’s get some basic facts out first. For Flipkart, this is a strategic sellout. Investors need exit; they had to look for a buyer at some point. For Walmart, this is a long-awaited entry into retail in India, after succeeding in other Asian markets like China and Japan.
Although Walmart has been present in India for about 20 years now, as a B2B (wholesale) player, Foreign Direct Investment (FDI) regulations restrict Walmart from doing B2C business in India. (The Department of Industrial Policy and Promotion (DIPP) allows 100 percent FDI under automatic route in marketplace model of ecommerce, while FDI is not permitted in the inventory-based model of ecommerce Walmart follows.)
After having established itself as the world’s largest retailer, Walmart wants to bite a chunk of the Indian retail market worth $670 billion, of which etail is $20 billion (and expected to touch 60 percent this year). Holding Flipkart’s hands, Walmart will surely expand the ecommerce market in India. Of course, there is the undeniable effect of Amazon, the only company which has posed a strong rivalry to Walmart in the US and Flipkart in India. But this new alliance does more than fight Amazon, which has got 35 percent market share in India in five years. Flipkart has a lot to learn from Walmart in terms of work culture and operations, while Walmart –being the veteran that it is – can take a leaf or two out of Flipkart’s book in innovation.
Read more at: https://yourstory.com/2018/04/walmart-flipkart-alliance-just-taking-amazon-india
Flipkart’s extravagance and Walmart’s frugality
Consistently efficient operation is Walmart’s key to offering low prices to the customers. In fact, their 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 too. While Flipkart likes its luxuries, be it swanky offices or 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 meager pay to their employees.
According to this article, researchers at some policy institutes have speculated that each Walmart associate does the job of 1.5 to 1.75 employees of a rival. It has also been said that Walmart staff are expected to keep costs at a minimum, even for heating and cooling of the buildings. In fact, after its acquisition, Walmart banned Jet.com employees from drinking at office, which was allowed at the startup till then.
Walmart’s main principle is to provide the cheapest possible prices to customers, and they go extra miles for that. Even the Walmart big box stores are minimalistic, saving costs for the company, which in turn benefits the customer.
In India, the next 100 million customers to come online will be the middle class, who check price labels before buying. Flipkart will benefit greatly by following conservative-minded Walmart’s dictum.
On the one hand, Flipkart will now have access to more categories and better quality products, thanks to a better pool of sellers from Walmart. But the 1.5 lakh existing sellers on Flipkart are a bit wary of the Walmart entry, as the 56-year-old company is infamous in the US for constantly pushing suppliers to cut prices.
Like many industry observers who feel that Indian ecommerce has practically become a war between American titans, online sellers are also concerned how this synergy will work out in pricing.
According to an online seller active on both Amazon India and Flipkart, Amazon being a US entity, their rules and regulations are set in Seattle already. “But Flipkart understands India better. They change rules according to how the ecosystem is evolving. But Walmart enters with the same US mentality. Flipkart will soon become like Amazon,” says this worried seller.
A major factor bothering the online seller community is discounts. To be clear though, Walmart does not give discounts; they have EDLP: their MRPs are just lower than competitors’. Walmart makes it happen with a diligently engineered supply chain with lower costs in operations, salary, transport, packaging, etc.
Arvind Singhal, chairman of Technopak consultancy, says that Flipkart will continue with discounts. “But their sourcing will be more intelligent now (with the entry of Walmart), and their pricing will be more tactical,” he adds.
The Walmart deal will give Flipkart access to international markets. To penetrate deeper into different markets the homegrown ecommerce unicorn will need deep pockets like Amazon – exactly what Walmart brings in.
Currently, Flipkart claims to have the largest market share in electronics, mobile phones, and fashion. (The first two boost GMV while the third gives good margins.) But this does not prove customer loyalty to the platform. Customers often do their research online and choose according to their wallet size. To build loyalty among customers, they need to shift focus to beauty, grocery, personal care items, furniture, home furnishing etc. – fronts on which Walmart can do a lot.
Mohit Gulati, a Mumbai-based investor, says Walmart will add further mileage into Flipkart’s winning categories like consumer durables, fashion, and groceries. “Flipkart has always been keen on grocery but execution in the grocery business is tough. With Walmart, the strength of execution comes to the foray for Flipkart,” Mohit says.
Source: yourstory
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April 14, 2018
Written By Deepti Govind
Bengaluru: Swedish giant Ikea Group’s entry into India will likely accelerate expansion of the country’s organized furniture market. But the company will have to rely heavily on after-sales assembly services rather than the do-it-yourself (DIY) model it uses elsewhere if it is to become really successful, experts said.
Source: livemint
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April 11, 2018
Written By SOURAV MAJUMDAR
We all know of the e-commerce battleground and the eyeball-to-eyeball confrontation between global giant Amazon and homegrown Flipkart. But an equally intense battle is unfolding behind the scenes: that’s for the top slot in the highly competitive online fashion sweepstakes. That the big boys in the e-commerce game will be locked in a fight to the finish on the fashion front is not without reason. At last count, the size of the Indian online fashion market was pegged at $4 billion, projected to grow 3.5 times to touch $14 billion by 2020. And that’s not all. Globally, online fashion retail is one of the largest categories in e-commerce and the same trend is visible in India, as more and more people log in to shop for clothes and accessories. Online fashion retail is also pretty much a battle between Amazon and Flipkart, with one little twist. Flipkart also has the Myntra-Jabong combine under its belt–the result of two acquisitions which demonstrated Flipkart’s seriousness about the fashion business–and the smallest player currently seems to be winning.
Our cover story, written by Deepti Chaudhary and Debojyoti Ghosh, takes a detailed look at what’s at stake in the online fashion retail faceoff. With gross merchandise volume (GMV) set to touch $1.85 billion by FY19, Myntra is in pole position, followed by parent Flipkart, which expects to finish FY19 with revenue of $1.6 billion. Amazon, with its legendary deep pockets, has some catching up to do, though its fashion business in India is also witnessing a very rapid pace of growth. Amazon Fashion is one of the top three stores on Amazon.in. The e-commerce giant saw an 80% growth in fashion in 2017, and the year before had seen growth of 100%. So clearly, the global giant will soon be snapping at the heels of Myntra and Flipkart. And that’s exactly what makes this fight so compelling to watch. Amazon is battling Flipkart in the larger ‘affordable’ fashion space, and taking on Myntra in premium fashion.
Meanwhile, Myntra is upping its game aggressively, using a combination of technology and fashion innovations which its chief executive, Ananth Narayanan, believes will keep the fashion e-retailer ahead in the game and even win against Amazon. The strategy, Narayanan says, is to innovate on three fronts: selection, service, and customer engagement. But retail consultant Devangshu Dutta, who describes Amazon as “relentless”, feels it’s a matter of time before the U.S. giant picks up pace even quicker, given that the margins tend to be high in this segment.
The online fashion story apart, another one I would urge you to read is about how the husband-wife duo of K. Ganesh and Meena Ganesh have put together a virtual ecosystem of exciting startups through their platform GrowthStory. The serial entrepreneur couple, known for their earlier venture TutorVista which they later sold, are entrepreneurs in the finest tradition.
Set up in 2011, GrowthStory today runs as many as 13 companies, mainly in the consumer Internet space, with successful brands like online grocery firm BigBasket, home healthcare provider Portea Medical, and online jewellery store BlueStone among them. The Ganeshs are different from your ordinary VCs in that they not only bring in investments but also put in place founding teams who then work as co-founders. We like to call GrowthStory a billion-dollar startup factory
Source: fortuneindia
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April 5, 2018
Written By Varsha Bansal, ET Bureau
BENGALURU: US-based online retail giant Amazon has thrown its hat in the ring to acquire India’s largest online retailer Flipkart as it looks to counter rival Walmart Stores’ attempt to gain a significant foothold in the market. Amazon and Flipkart have initiated talks a few weeks ago for an acquisition even though a bid is yet to be submitted, according to two people familiar with the development.
US-based retail giant Walmart Stores, which has been in discussions with Flipkart for over two months, continues to be the most likely contender but is negotiating on the price of secondary shares.
Walmart is looking to acquire the secondary shares in Flipkart at a valuation of $10-12 billion, which is much lower than the expectation of Flipkart’s investors who want their shares to be acquired at closer to the primary round valuation of $20-22 billion, according to one of the sources mentioned above. This has led to Flipkart board agreeing to open up conversations with other potential suitors — including Amazon India. “Amazon and Flipkart have been talking for a few weeks now but it hasn’t progressed as much as Walmart talks which have been going on for two months,” said the second source mentioned above, adding that a transaction with Walmart is the most likely outcome. “With Walmart they can run it as an independent company and Flipkart legacy can continue.”
For a transaction to go through, “Amazon’s offer has to be as good as Walmart’s,” added this source. Walmart did not respond to queries sent by ET at the time the story went to press. Flipkart declined to comment and an Amazon spokesperson said “we do not offer comments on rumours and speculations.”
Mint reported about the latest discussions between Flipkart and Amazon on Wednesday. ET had reported about similar discussions between Amazon and Flipkart in March 2016. ET was the first to report on Walmart being in advanced talks to pick up a stake in the ecommerce company in its January 31 edition. Walmart has been aggressively expanding its presence in the US online retail market to take on Amazon after buying Jet.com for $3 billion in 2016. But an acquisition of a majority stake in Flipkart would be its biggest investment in the online space as it looks to build an omnichannel play.
Walmart has taken time to get its strategy right in India, a market where rival Amazon has made plain its aggressive intent, having committed investments of over $5 billion to build logistics infrastructure and also woo customers with hefty discounts and selected offerings including Prime Video. Walmart, which had aggressively lobbied the Indian government for an open market for foreign retailers in the past, adopted a morecautious stance after the breakdown of its joint venture with Bharti Enterprises five years ago.
Experts tracking this space believe that a possible Amazon-Flipkart deal could raise objections from the industry about the duo cannibalising the ecommerce market. Moreover, a possible Amazon-Flipkart acquisition could lead
to a close scrutiny by the Competition Commission of India (CCI).
“My sense is that a transaction between these direct competitors, given their size and presence will need to be approved by the CCI and in that process is likely to be more closely scrutinised in comparison to a Walmart-Flipkart deal,” said Ravisekhar Nair, partner, Competition Law at ELP. “That said, the CCI has never blocked a transaction in the last seven years that we know of. So, the CCI, after reviewing the transaction can potentially approve it subject to structural and/or behavioural commitments.”
Other experts also said that there could be objections about two large competitors who have impacted other retailers through aggressive promotions and discounts, India’s retail market is still large. “The defence would be that ecommerce is still a tiny fraction of India’s retail market,” said Devangshu Dutta, chief executive of retail consulting firm Third Eyesight.
Source: economictimes
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March 30, 2018
So who stands to benefit from an Ola-Uber merger? It is not the customers or the drivers as the monopoly will drain the market off of choices.
Written By Sulekha Nair
Uber Technologies Inc. had to eat crow and almost exit Southeast Asia because of competition from rival Grab, but for a deal that gives the American firm a 27.5 percent stake in the latter. After news of that surrender broke earlier this week, rumours about Uber merging its operations in India with that of its biggest competitor Ola have been doing the rounds.
Sources in the know of the development have reportedly confirmed that senior executives from both firms have met several times over the past several months. The talks indicate that homegrown Ola will take over Uber India. However, the blueprint of a deal is yet to be worked out and could take several months, an unnamed source told the PTI. Japan’s SoftBank is the largest investor in both firms and is facilitating these talks.
Ola shot down claims about talks with Uber, and told the news agency that, “Ola is always actively looking for opportunities to expand its footprint. SoftBank and all other investors are committed to realising this ambition.”
Two analysts Firstpost spoke to were of the opinion that a merger seems unlikely. Two others said it could go through.
Paula Mariwala, Partner, Seedfund and co-founder, Stanford Angels, ruled out the possibility of a merger. She reasoned that both taxi-hailing apps were the fastest growing in the sector that they operate in. “Both face the same issues and have come in the crosshairs of the government.” For instance, they were pulled up for surge-pricing in the NCR during the Delhi government’s implementation of the odd-even car scheme. Mariwala added that there is no need for consolidation, given that there is no other player like Ola and Uber in the Indian ecosystem, referring to their deep pockets.
Another reason cited for a merger not going through is that there is considerable headroom for growth for both players. Kavan Mukhtyar, Partner and Leader – Automotive, PwC India said that when there are leading players in any sector, there isn’t much scope for consolidation. “There is private equity capital that both the players are pursuing and there is expectation of growth.”
Ola has seen an increase in its market share, from 53 percent in July 2017 to 56.2 percent in December 2017, according to market intelligence firm KalaGato. Uber’s market share for the same period slid from 42 percent to 39.6 percent, according to a report in Scroll. But there is still room for growth, especially in Tier 2 and Tier 3 cities, Mukhtyar added.
It’s possible
Source: firstpost
