What are the relations between Walmart and the Indian brand Flipkart?

What are the relations between Walmart and the Indian brand Flipkart?
Retail
09:45, 23 April 2022
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The Target retail chain, which has over 1,920 stores across the US, often reminds visitors of Walmart. Therefore, many people think Target is a subsidiary of this label. The stores are designed for large wholesale purchases and set up optimal prices.

Walmart is one of the largest supermarket chains. And its influence is very great, because unlike online stores, it has physical outlets all over the world. The company's branches are located not only in the US but also in other countries:

  • Canada;
  • Mexico;
  • China;
  • Japan;
  • United Kingdom;
  • South America.

Because the policy of the retail chain takes into account large discounts and other privileges, a special rivalry of hypermarkets can be observed in populous world regions. Therefore, customers are interested in the affordability of Walmart stores in India, which are home to more than a billion people. And they get a rather strange answer: yes and no at the same time.

Is it possible to visit a Walmart store in India?

Unfortunately, it’s impossible to visit a Walmart store in any of the largest centers of this country. But the investors from Walmart decided in 2018 to acquire a key stake in Flipkart's electronic commerce company (77% initially, and 82% as of 2022).

The food giant also took control of subsidiaries of the Indian brand:

  • PhonePe (UPI electronic payment service);
  • Jeeves (guarantee maintenance);
  • eKart (logistics company);
  • Myntra (fashion brand);
  • Cleartrip (online tour operator).

The major Flipkart office is in Bengaluru in the Karnataka (state). Walmart could open outlets for off-line shopping in India, but this will most likely not happen because of several reasons, which will be discussed below.

Walmart in India: How the American hypermarket chain took root in the cradle of the world

Since there are no physical Walmart stores in India, customers can visit Flipkart stores, on which the overseas brand has a significant influence. Interestingly, having all the opportunities for aggressive business expansion, Flipkart Group doesn’t seek to break long-standing traditions. India has a completely different approach to doing business, strikingly different from its American partners.

The South Asian country has established special state regulation regarding the foreign companies that are trying to globalize their home market. After buying the key block of shares, many Indian investors were against bargain because of the threat to the local economy. The owners and purchasers justified the decision with excellent prospects in the development of e-commerce.

In doing so, this is not the first time Walmart has used such a strategy. In 1999, the British supermarket brand Asda became a subsidiary of the American company. This approach provides for a softer trade policy instead of opening big-box stores.

Flipkart: The history of the company

The Indian brand appeared in autumn 2007 thanks to the efforts of two namesakes: Sachin and Binny — both persons by the surname Bansal. They were also united by a long-term collaboration with Amazon. And this is an interesting fact, since Walmart is an old rival of Amazon. But a vying between the two giants intensified gradually. Flipkart started its activity as an online bookstore and gradually grew, expanding the range of its products and services.

When Walmart and Flipkart merged, the battle of the titans ended with Amazon losing. In 2020, the Indian brand acquired 28 wholesale clubs from Walmart, which make it possible to buy goods in large quantities. But this privilege is only available to members of the system based on consumers’ co-operative with special purchase pricing.

Shopping in Delhi and other major Indian cities

Customers shouldn’t be upset because they can’t visit Walmart in India, as there are many other shopping options.

There are also some ways to make purchases through an American brand, but not directly. As mentioned above, Flipkart adheres to the wholesale trade scheme, the functionality of which is available only to special categories of buyers. Usually, you have to pay annual fees for membership in the club, but it’s worth it, because prices remain as low as possible.

Wholesale-club stores are not available to ordinary customers, and among its regular buyers there are:

  • representatives of kiranas (or small corner stores);
  • owners of small and medium-sized businesses;
  • micro enterprises.

Kirana stores make up a vast majority of the entire Indian market in the food trade area. Thus, kiranas found a major supplier not only of familiar goods but also those that may be unusual for local people. The American brand hasn’t yet captured the Indian economy, but at least it has found a stable market.

Small corner stores are highly valued in the country because of their affordability, and many businesses are run by noble families. Due to these factors, people who get products from familiar sellers (and those make purchases at Flipkart) actually carry their money to Walmart. Such a thoughtful and unusual integration.

Online shopping is available to customers through the Flipkart web store, which allows you to buy goods swiftly or make a wish list. There are over 70 items in the goods grid, including:

  • media products;
  • smartphones;
  • electronics, etc.

Why can't Walmart open outlets for offline shopping in Delhi?

The reason it’s difficult for an American brand to enter the Indian market lies in strict government regulation, which prevents foreign companies from absorbing the country's economy and leaving behind many family businesses. They are distinguished from other business forms by their independence, and this is their primary advantage. In the pandemic year, when food supplies were massively disrupted and stores faced logistical problems, kiranas literally saved customers not only due to prices but also a favorable location close to home. There are more than 12 million of such outlets throughout India.

If large conglomerates seize the Indian market, pushing small enterprises that form the basis of citizens' well-being, the market competition will be destroyed, which may negatively affect the country's economy. What does Walmart do in this case? That's right, looking for ways to circumvent the legislation. This allows the brand to receive a large profit due to growth of the population.

But there are also issues with profitability. Although the population of India is growing, and most people are actively working, wages in the entire country are very low, and recently it has even declined. The pandemic, which has deprived over 30 million people of their well-being, has had the most negative impact. Therefore, it’s hardly possible to count on the fact that the company's profit will grow rapidly in a country with small incomes and low purchasing power. So opening Walmart supermarkets in India is problematic.

Once an American brand tried to open its branches in India and even negotiated with local government agencies, but it was to no avail. As a result, they bought Flipkart shares in the amount of $16 billion. Moreover, the ultimate cost changed several times, but Walmart offered the best price, thus achieving its goal.

The bottom line

Because of many economic factors, the Walmart retail chain can’t open physical stores in India. But the company found a solution by repurchasing the majority stock in Flipkart, with the help of which the owners still manage to enter the Indian market, albeit under the guise of another brand. The American company is engaged in the food supply, which can only be acquired by managers and representatives of various local enterprises specializing mainly in food.

At the same time, there is an opportunity to develop the electronic payments and online commerce jointly, which allows Walmart to push such trading giants as Amazon.

Thus, due to non-standard solutions and perseverance, Walmart stays afloat and wins the competition even in times of unstable situation in the global economy.

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