Wal-Mart Is in Talks to Invest in Indian Startup Flipkart
By: Rick Carew, Preetika Rana, and Sarah Nassauer. Sept. 28, 2016 12:59 p.m. ET
Blog post by: Angie De La Cruz
According to a source familiar with the company, Wal-Mart Inc. is currently in discussions with Flipkart Ltda., India’s largest e-commerce firm, about investing in the startup. If the deal goes through, the alliance will result in an increase in market share for both companies in Asia’s third-largest economy, a market that has long avoided the world’s largest retailer.
As China’s economy slows down, many companies such as Amazon and Uber, among other startups, have turned their focus to India - one of the last big unexploited frontiers for big global brands. Earlier this year Amazon expressed their plan to invest an additional $3 billion in India, taking its total investment up to $5 billion in the country. Amazon’s total revenue was $107 billion last year. In contrast, Wall-Mart’s e-commerce sales reached nearly $14 billion last year. However, quarterly e-commerce growth has slowed in the recent years. In 2013 Wal-Mart abandoned plans to build stores in India due to the country’s high entry barriers. This decision left the firm with a very small footprint in the world’s second most populous nation; that is operating in 21 wholesales stores, none of which are allowed to sell directly to consumers. Although marketers estimate that 4% of India’s population regularly shops online, they believe the market will soon bloom as it did in China. For instance, Morgan Stanley predicts that Indian online sales will reach $100 billion a year by 2020 up from $3 billion in 2013.
Experts predict that investing in Flipkart will help Wal-Mart gain a better position in India. In addition, it will provide Flipkart with a powerful partner with more capital that will allow them to get ahead in their competition against Amazon to become the dominant online retailer in South Asia. From a global marketing perspective, this strategic alliance is an excellent way to enter and establish in new international market. Investing in a local company will save the foreign company time, money, and effort in the global marketing research process. Flipkart’s know-how regarding the Indian e-commerce market and regulations will definitely help Wal-Mart to ease their entering process. Thus, Wal-Mart’s possible partnership is a great example of the alternative market entry strategies we learned in Chapter 12 of our Global Marketing textbook.