Flipkart-WalMart deal talk: It is not about Jeff Bezos led Amazon

Flipkart, in which Walmart has proposed to take a major stake, has a lot to learn from Walmart in terms of work culture and operations, while Walmart can take a leaf or two out of Flipkart’s book in innovation. Of course, there is the undeniable effect of Amazon, the only company which has posed a strong rivalry to Walmart in the US and Flipkart in India. But this new alliance does more than fight Amazon.

Consistently, efficient operation is Walmart’s key to offering low prices to the customers. 

While Flipkart likes its luxuries, be it swanky offices or pay packages to fresh graduates, Walmart executives still fly economy class.

Walmart’s main principle is to provide the cheapest possible prices to customers, and they go extra miles for that. Even the Walmart big box stores are minimalistic, saving costs for the company, which in turn benefits the customer. In India, the next 100 million customers to come online will be the middle class, who check price labels before buying. Flipkart will benefit greatly by following conservative-minded Walmart’s dictum. On the one hand, Flipkart will now have access to more categories and better quality products, thanks to a better pool of sellers from Walmart.

The Walmart deal will give Flipkart access to international markets. To penetrate deeper into different markets the homegrown e-commerce unicorn will need deep pockets like Amazon - exactly what Walmart brings in. Currently, Flipkart claims to have the largest market share in electronics, mobile phones, and fashion. But this does not prove customer loyalty to the platform. Customers often do their research online and choose according to their wallet size. To build loyalty among customers, they need to shift focus to beauty, grocery, personal care items, furniture, home furnishing etc - fronts on which Walmart can do a lot.

Mohit Gulati, a Mumbai-based investor, says Walmart will add further mileage into Flipkart’s winning categories like consumer durables, fashion, and groceries. “Flipkart has always been keen on grocery but execution in the grocery business is tough. With Walmart, the strength of execution comes to the foray for Flipkart,” Mohit says.

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Satish Meena, forecast analyst at Forrester Research, says Flipkart will now focus on more private label and higher margins, and expansion based on pricing outside metro cities. “It is not easy to get traction for their private labels without more investment in supply chain, logistics, and offline stores. It is only a matter of time before Flipkart opens up offline stores. Walmart is already offline and can open physical retail in India with Flipkart brand stores in the long term,” he says.

Additionally, Walmart has started a new model in the US for certain categories, which can be replicated in India. Called “Check out with me”, this programme is piloting in the Lawn and Garden category now.

Customers no longer need to venture inside the physical store to pay for items like mulch, soil, and flowers, saving them valuable time. A Walmart associate scans a customer’s items with the Check Out With Me mobile device, swipes their credit card and provides them with a receipt - printed or electronic options available.

Customers just (need to) pay and go.

Devangshu Dutta, chief executive at Third Eyesight consultancy, said Walmart has a good sense of product development, sourcing and supply chain. “Flipkart is big in commodities products like books, mobile, fashion etc and they operate well independently. But a sense of product management does not permeate Flipkart as they remain just a marketplace. They are discount-driven,” he says.

For Walmart, it is a move into another large market. Although Walmart is one of the largest companies in the world, valued at around $500 billion, currently their market cap is stagnating in the US. With the Flipkart deal, Walmart is in a position to get on a higher ground as they have a stake in the biggest e-commerce company in India.

An analyst said, “What Walmart essentially gains is a foot in the door. It never has had an online presence and it knows that to take on Amazon it has to get a strong online presence.” Of course, Walmart will not repeat the US mistake in India. Amazon had lot of time to build e-commerce in the US, and became a sticky platform. Since e-commerce has grown roots in India only over the last seven years or so, Walmart still gets an early mover advantage.

Source: DNA Money (YourStory.com)