For the past few years, the ongoing battle between Walmart and Amazon to capture market shares in the US market has garnered national attentions. The two giant retailers are throwing every trick in the books to try to defeat its opponents. Amazon for the past few years has acquired brick and mortar retail stores like Whole Foods in a effort to further penetrate the grocery market and establish a supply chain and distribution network to supports its growing eCommerce business. Walmart in term beefed up its own online retailing footprint while at the same time consolidate its brick and mortar operations to better position itself for the upcoming expansions.
Well, now it seems like the battlefield has spilled over to international markets. Walmart recently placed a $15 billion bid for 75% of India’s eCommerce platform, Flipkart. This transaction is looked at as a direct shot at Amazon for the following reasons:
- To start off, Flipkart is started by 2 former Amazon employees. What better way to annoy Amazon than acquiring a company started by its former staffs. Acquiring Flipkart will also allow Walmart to gain insider knowledge about the operations inside Amazon in order to re-position its own eCommerce division.
- Purchasing Flipkart will also allow Walmart to expand its own operations within the lucrative and growing Indian retail market. Currently, India’s retail market is estimated at $800 billion of sales on an annual basis. The market is expected to grow to over $1 trillion over the next few years. Walmart had already establish a presence in India through brick and mortar stores, however these stores have not had the success that the company had hope for due to strict foreign direct investment regulation that the Indian government places on the retail industry.
- Purchasing Flipkart and entering into the Indian eCommerce space also present another opportunity of using this as a testing ground for new innovations. Even though Indian retail market is attractive, in the end what matters most is the retail market in the US and China. Through Flipkart, Walmart can practice strategies and innovation that it can later transfer to the domestic market. This is valuable because in the future it needs a more comprehensive and unique business strategy, if it wants to compete with Amazon who is dominating the online retailing space.
In the end, this is only the first salvo of shots that these companies are exchanging. In the near future, one should expect to see a cluster of M&A activities between these two companies in the hope of winning the retail market.