Google, the global search giant, is quietly shopping in India. Alphabet, the parent company of Google, is looking to invest $3 billion in Flipkart for a 10 per cent stake, even as Walmart is set to take the majority share in the Indian e-commerce company.
Google has been “keen to grab a lion’s share of the Indian market. The company is expected to invest $3 billion as part of the Flipkart deal for a 10 per cent share. Though small, it will lay the foundation for Google Express to soon set up its network in India, so that it works with local Walmart stores and rolls out same-day deliveries," said sources, seeking confidentiality.
Better, faster experience
They point out that the Google and Walmart arrangement in Flipkart is set to offer consumers a better and faster e-commerce experience than is available currently from Amazon, the other biggie in the e-commerce space.
“Walmart is getting itself fit to fight Amazon. It has been looking for a right-mix of businesses to take on rivals in the retail offline as well as online segment and the only real competition in both is Amazon. The latter is also a common rival to Google on many fronts," said sources.
Heated competition, aggressive promotions, price wars and depleting footfalls across its stores have become major hurdles for Walmart. By signing on the dotted line to take a majority stake in Flipkart, the big-box retailer is looking to expand its international reach, after bolstering its position in Mexico and in China, where it invested in an online player and then exchanged it for a stake in JD.com, the No. 2 e-commerce player behind market leader Alibaba.
“The consolidation of the e-commerce market is long overdue," Ankur Bisen, Senior Vice-President, Retail and Consumer Products division at Technopak, a management consulting firm, told BusinessLine . “The Walmart-Flipkart deal represents consolidation in a space that has huge potential, for apart from China and the US, only India can provide a growing opportunity in this space," he said.
Walmart clearly considers India a long-term strategic market, and zeroed in on Flipkart though the latter has consistently been a gross margin negative business. Corporate filings show Flipkart posted a loss of $1.3 billion on revenues of $2.9 billion in the year ended March 31, 2017.
Bisen pointed out that Walmart's investment in India should also be “seen under a strategic lens and against its strategic retreat from the UK and Brazil”.
“Walmart has been eyeing India from the 90s. This deal (Flipkart) has been 15 years in the making and the retailer and the e-tailer will now sharpen their business model," added Bisen.
A win-win for all
Shrenik Gandhi, Co-Founder and CEO, White Rivers Media, a digital marketing and media agency, terms the deal “a win-win situation for everyone. Win for the customers because the deals, discounts and brand loyalty is here to stay, and win for the company because now they have the ammunition to not just sustain, but to possibly win at this game and a huge win for the ecosystem”.
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