Flipkart plans to turn Walmart’s stores into warehouses, says report

Written By Yashi Gupta

The numbers are not working in Walmart’s favour either. More than a decade after entering the country, Walmart has accumulated a loss of Rs 2,500 crore. In the year ended March, Walmart India posted a net loss of Rs 299 crore while revenue grew 20 percent to Rs 4,926 crore.

Flipkart plans to cut Walmart’s store size by half to turn the remaining space into warehouses for its online business, according to an Economic Times report. Sources told ET that Flipkart could entirely convert some stores into fulfilment centres.

Walmart started its operations in India in 2009 and currently operates 29 stores with the size of 50,000 sq ft. In July 2020, Flipkart acquired Walmart’s cash-and-carry business and announced the launch of a new B2B marketplace, Flipkart Wholesale. This reverse acquisition was expected to accelerate its expansion in the food and grocery segment and strengthen its supply chain.

However, the falling relevance of brick-and-mortar stores in India has now prompted the e-commerce firm to convert twenty-nine of Walmart’s cash and carry stores into wholesale and warehousing centres. Before the acquisition, Walmart was planning to cut its store sizes from 50,000 to 45,000 sq ft. The then President and CEO of Walmart India, Krish Iyer, had said in 2019: “Customer centricity and availability of right real estate land parcel help us determine the location and size. At a couple of locations, we have developed smaller stores of 45,000 sq ft more so to help us meet the member needs of those unique geographies based on the availability of right land parcels.” This strategy gave it an advantage in terms of market penetration to serve the customers optimally.

The latest decision was taken to adapt to the changing consumer in behaviour and mounting losses. According to the latest data, Walmart’s stores generate half of their revenues from online sales or sales teams visiting B2B members for orders.

“The existing stores serve local businesses and Kirana stores but combining it with online will help address the entire catchment area better,” said Devangshu Dutta, founder of strategy consulting firm Third Eyesight. “So they are making the assets work a little harder and clearly it is a logical move to combine their online strength with a brick-and-mortar presence.”

The numbers are not working in Walmart’s favour either. More than a decade after entering the country, Walmart has accumulated a loss of Rs 2,500 crore. In the year ended March, Walmart India posted a net loss of Rs 299 crore while revenue grew 20 percent to Rs 4,926 crore.

Flipkart has also announced absorption of 5000 of Walmart’s employees on Friday. It said that Walmart’s employees would be given corresponding roles in Flipkart with matching terms of compensation, responsibility, and profiles.

Source: cnbctv18