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With Flipkart Deal, Walmart Expands Online and Global Profile

Walmart has completed its investment with Flipkart, India’s leading e-commerce marketplace platform, as it ramps up its online and global presence.

The retailer now holds roughly 77 percent of Flipkart, with the remainder of the business held by other shareholders, including Flipkart co-founder Binny Bansal, Tencent, Tiger Global and Microsoft Corp. Flipkart’s financials will now be reported as part of Walmart’s International business segment.

Walmart’s investment includes $2 billion of new equity funding to help accelerate the growth of the Flipkart business. Both companies will retain their brands and operating structures in India.

The partnership is expected to leverage combined synergies, including market insights, retail expertise and local and global supply-chain knowledge.

“Walmart and Flipkart will achieve more together than each of us could accomplish separately to contribute to the economic growth of India, creating a strong local business powered by Walmart,” Judith McKenna, president and CEO of Walmart International, said. “Our investment will benefit India by providing quality, affordable goods for customers, while creating new skilled jobs and opportunities for suppliers. As a company, we are transforming globally to make life even easier for customers, and we are delighted to learn from, contribute to and work with Flipkart to grow in India, one of the fastest-growing and most attractive retail markets in world.”

Bansal added, “By combining Walmart’s omnichannel retail expertise, supply chain knowledge and financial strength with Flipkart’s talent, technology and local insights, we are confident that together we can drive the next wave of retail in India.”

Moody’s lead retail analyst Charlie O’Shea, in a report last week, said Walmart’s major shift in international strategy proves that it’s increasingly looking for ways to offset competition from the likes of Amazon and others in the space.

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“A major retailer like Walmart needs to remain on the move, especially when up against a voracious growth-oriented competitor in Amazon. Walmart has a lead in India, at least for now, over Amazon,” O’Shea said.

In reporting second-quarter results last week, Walmart said e-commerce sales increased 40 percent in the period. E-commerce sales also contributed about 100 basis points to comp-store sales in the three months ended July 27.

Though Flipkart generates losses and will for at least the next few years, according to O’Shea, estimates peg India’s online sales growth potential at $200 billion.

“While Walmart is spending heavily for this growth, and the deal may not end up scaling profitably for some time, revenue has the potential to take off,” O’Shea said.

Brick-and-mortar retail in India is also much less developed than in the U.S., which increases the importance of online, O’Shea added.

Walmart said the Flipkart investment transforms its position in a country of more than 1.3 billion people, strong gross domestic product growth, a growing middle class and significant runway for smartphone, Internet and e-commerce penetration. As Walmart scales in India, the company said it will continue to partner to create sustained economic growth across agriculture, food and retail.