Four reasons why Walmart – Flipkart deal is a disaster:
1) Indian e-commerce market is 1% of retail. Even if Flipkart performs great over the years, it can take at max 30-35% of that 1%. USD 18 (16+2) billion for 0.3% market!? Walmart can do that by investing mere 20%.
2) History repeats itself. Walmart-Bharti deal was a disaster. Indian consumer behavior is very different and not analogous to other countries. Also, Flipkart’s customer service is no match to that of Amazon.
3) It won’t be bread and butter for Walmart to buy a major stake in Flipkart and start a chain of retail stores across India. FDI norms, as current, won’t easily let them do that. Saving SME is still the driving factor (and rightly so) of India’s FDI policy.
4) Will the Taxman and Market Regulators allow the deal to pass easily? Will Flipkart come up with an IPO down the years? If yes, will the firm be profitable soon? And if all is well, why are the founders reportedly leaving?
The only positive sign is Alphabet’s involvement. But will that help Alphabet more or Walmart?
The real winner here is Amazon. Amazon-Flipkart deal made more sense but that did not happen. The push by Amazon to make sure Walmart bids high played out really well.
Great time for other Indian e-commerce firms to rise and catch up.
Abhimanyu Dinesh Rathi 