Chotu was reading BusinessLine when the mobile phone came to life with his friend Motabhai’s face filling up the screen.

Haan Motu, what’s up so early in the morning?

Walmart is here, Chotu, I believe it is buying Flipkart.

Yes, but why’re you so excited about it?

I can now match my cousin in Chicago who is boasting all the time about his shopping visits to Walmart, about how he gets the best deals there, about how he once returned a denim trouser after using it for a week and still got a full refund with no questions asked... I believe they have huge stores where you get everything under the sun.

True, but please get hold of yourself, Motu. Walmart is here, and is not here too.

Now don’t go off on one of your enigmatic trips, Chotu.

Motabhai, Walmart has bought Flipkart but it will not be setting up its stores here. It will run the online e-commerce business of Flipkart.

Oh, but I read that it is paying $16 billion to buy Flipkart. All that money only for online business?

Yes, my friend, you read that right.

I can’t understand this Chotu. With that money Walmart could have set up thousands of stores across our country...

It could have if only the government had allowed it to. Didn’t you know that foreign investment in multi-brand retail is not allowed in India?

Ah, ok, but I still can’t see why Walmart, which is reputed for its physical stores, is spending so much money to acquire an online retail business...

Motabhai, do you know that our online retail business is estimated to touch $72 billion this year and growing at 30 per cent? And though there are several small players, the market is mainly divided between Amazon and Flipkart with Paytm Mall coming in at third.

Achcha , but in that case Walmart could have set up its own online business here, isn’t it?

It could have, for sure. But it would have taken time, a lot of effort and in the end Walmart, as the fourth player, would have still been jostling with Amazon, Flipkart and Paytm Mall for business. By taking over Flipkart, Walmart gets a well-established network of fulfilment centres, sellers, logistics chain and, most important, customers. And it establishes itself as a brand in the minds of consumers which it can exploit whenever it gets permission to start physical stores.

Fulfilment centres?

Imagine a large warehouse where most of the goods that are listed in Flipkart’s website are stored. These centres are set up across the country from where customer orders are serviced. It takes time, a lot of money and several approvals to set them up. Besides, there’s another point...

Which is...

You must have heard of Alibaba...

Yes, of course, I got the first prize in primary school for narrating the story of ‘Ali Baba and the Forty Thieves’ correctly...

Buddhu Motabhai, when will you grow up? This Alibaba is not a thief but a big e-commerce company from China...

Oh, is it...

Yes, and Alibaba, which is already an investor in Paytm Mall was prowling around to establish a bigger business in India.

So...

Walmart has ensured that Alibaba does not get to lay its hands on Flipkart now... It’s a strategic acquisition to keep a dangerous competitor at bay.

Wow, so much thought behind this deal. But I believe the two Bansals who own Flipkart were once employees of Amazon?

Yes, Motu. Amazon must be kicking itself for letting them go.

Related Topics
comment COMMENT NOW