Taking on Jeff Bezos is not something people look forward to in daily corporate life.
Walmart, probably, knows it the best.
Walmart’s CEO, Doug McMillon, may be looking to learn from Flipkart about Indian ecommerce play, but considering how the US major floundered in India with its offline initiatives, it may not be that simple.
While it is early days yet, Walmart's strategy for India is not clear and additionally, Amazon India is sure to strike back.
There are many who believe that Walmart should have just concentrated on fighting Amazon in the US, which contributes to over 75 percent of its EBITDA. But it has been tempted by the opportunity Flipkart presented.
The India story was something that Walmart seemed to want badly and it is clear why McMillon looked at Flipkart. India has a high mobile device ownership with around 500 million broadband connections, and the ecommerce business has been growing at 30 percent year-on-year.
But now, they may have to pay for it. Amazon, the world’s biggest ecommerce player, has committed $5.5 billion into its operations in India, and has said that it will invest even more.
Amazon’s chief financial officer Brian T Olsavsky in April had said that the company will continue to invest in India.
“We like the momentum we have seen there,” Amazon's Brian Olsavsky said.
There are reports that Flipkart, now a Walmart company, will invest another $2 billion over the next 18 months. And it is a good time for some investments. India’s online retail market may expand to $28 billion in 2018, up from $17.8 billion last year, according to market research agency RedSeer Consulting. Amazon has already invested $3.5 billion of its committed $5 billion investment into India. And it is only a matter of time before Bezos comes up with another big announcement.
Amazon had reported a loss of $622 million on revenues of $14.9 billion for the March quarter, compared to a loss of $481 million on revenues of $11.1 billion a year ago. But that is not going to deter Bezos, Amazon’s hard charging, high-risk taking boss. He has already given up on China, where Alibaba and JD.com rule, and India is too huge a market for him to ignore.
Gartner’s research director Adrian Lee says 200 million Indian consumers will be shopping online by the end of 2018.
“As consumers are more attuned and comfortable to shop online with ecommerce marketplaces, we see vertical specialists (largest categories being fashion and electronics) benefiting. As ecommerce penetration in India continues to remain low (at 15 percent), I fully expect discounts/promotions to continue unabated,” Gartner's Adrian feels.
According to a Frost & Sullivan report, with Walmart acquiring a 77 percent stake in Flipkart, the two companies together can leverage the opportunity of being the largest ecommerce player in both food and non-food segments. “Although ecommerce players like BigBasket and Grofers are the preferred sites for food and grocery purchases online, grocery as a segment has less than 5 percent share both in terms of value and volume. Walmart’s strength in food and groceries is expected to change this equation in future. We believe the food and groceries segment will occupy a larger share for ecommerce players in the near future,” the Frost & Sullivan report said.
This is a challenge that Amazon will have to face head on. Amazon India has received a fresh infusion of Rs 2,600 crore from its parent company for its marketplace business, and the turf is ready for another battle.
This time, it is Walmart trying its luck in India.
It will take a brave soul to bet against Bezos.