Months of frenzied market speculation finally came to an end with the world’s largest retailer Walmart Inc. acquiring a 77% stake in India’s biggest online retailer Flipkart for $16 billion. “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 the transformation of e-commerce in the market. As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market,” said Doug McMillon, Walmart CEO, after the deal was inked and sealed.
Walmart and Amazon had both bid for a controlling stake in India’s leading e-commerce company, at a valuation of about $20.8 billion. If Amazon had succeeded, it would have given the company control over an estimated 80% of the country’s nascent online market, which is expected to grow rapidly over the next several years. While e-commerce in India accounts for just 2% of total retail sales today, it’s expected to grow to 12% by 2026. Morgan Stanley sees India’s e-commerce market growing to $200 billion in around a decade.
It therefore makes sense for Walmart to beef up its online capabilities as it does for other top retailers as well, what with the lines between online and offl ine getting increasingly blurred.
Going forward, it will be interesting to see how this historic deal will impact and shape the contours of India’s fast growing retail sector. Expect more of consolidation, mergers and acquisitions and offline-online partnerships in Lokesh Arora, Sr. Vice President the sector in the days ahead.