Walmart is beating Amazon in the battle for online consumers in India, a rare ecommerce win for a US retailer known for selling low-cost goods in bare-bones stores.
Walmart struck the most expensive ecommerce deal in history to break into the Indian market in 2018, paying $16bn for a 77 per cent stake in Flipkart, an online retailer founded by former Amazon employees in the world’s most populous country.
The deal was criticised by analysts who expressed concerns about Flipkart’s losses and Indian regulations designed to protect traditional retailers. Flipkart’s results in the years since serve to vindicate Walmart’s decision to pay top dollar for the Indian opportunity.
“Did Walmart overpay for Flipkart at that time? Yes. But were they able to get value for their money in the subsequent years? Yes,” said Abhishek Goyal, co-founder of data firm Tracxn and a former executive at Accel Partners, Flipkart’s first institutional backer. “If you look at the global markets, there was no other mature ecommerce company that existed which could help Walmart compete with Amazon. Flipkart was the only viable asset.”
Flipkart’s valuation swelled to $38bn in 2021 after it raised another $4.8bn in equity — including an undisclosed additional amount from Walmart, and investments by the likes of SoftBank of Japan and Singapore’s sovereign wealth fund GIC.
India became a key battleground for Walmart and Amazon as both struggled to compete in China against local players such as Alibaba Group and JD.com. The story was similar in other fast-growing Asian markets, where companies like Shopee and Lazada of Singapore and Indonesia’s Tokopedia, Blibli and Bukalapak proved formidable competitors. Indian ecommerce sales are expected to triple to $135bn from 2020 to 2025, according to Bernstein research, roughly the same as south-east Asia.
Thanks to the Flipkart deal, Walmart is seen as the industry leader in India, although neither it nor Amazon makes money from its online operation and both have lost some market share in recent years as local conglomerates like Reliance Industries and the Tata Group have grown more active.
Flipkart’s market share was 48 per cent last year and Amazon’s was 26 per cent, according to research firm Redseer Strategy. Bernstein estimated that Flipkart recorded gross sales of $23bn in India during 2021, while Amazon took in $18bn to $20bn.
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Redseer’s figures suggest Flipkart has been growing more quickly than Amazon in India. It calculates that Flipkart’s gross sales rose 40 per cent year-on-year in 2021 and 23 per cent in 2022. The comparable figures for Amazon were 26 per cent and 10 per cent, it said.
“Amazon has a significant gap with Flipkart and, potentially, the gap could become larger, making it really difficult for them to bridge it, at least in the short term,” said Mrigank Gutgutia, partner at Redseer.
Amazon said that “the data about Amazon” in the Redseer report is “not correct”, but did not disclose its estimates of its Indian market share. It added: “Amazon is the most visited and trusted online shopping destination in India. Our customers across the country trust Amazon to buy what they need from categories such as smartphones, electronics, fashion and beauty, home and kitchen, and everyday essentials. We are excited about the future of our business in India and remain focused on delivering and innovating for our customers, sellers, partners, brands, and employees.”
Flipkart declined to comment on its market share and sales growth.
Industry watchers said Flipkart has carved out a niche in smaller towns and cities with a wide assortment of inexpensive goods and offerings like Shopsy, an app launched in 2021 to target value-conscious buyers with extremely cheap products. It also owns Myntra, a popular online fashion store.
Amazon, which will mark its 10th anniversary in India in June, has gained popularity with wealthier urban Indians on the back of Prime, a subscription service that offers faster deliveries, discounts and video streaming. But it lags Flipkart in categories such as mobile phones, fashion, electronics and appliances that accounted for about 70 per cent of the Indian online retail market in 2022, according to Redseer. Both it and Amazon trail Tata Group’s BigBasket in grocery sales.
“The problem for Amazon is that even their Prime subscribers shop fashion from Myntra and groceries from BigBasket,” said Satish Meena, an independent ecommerce consultant. “The idea was that if someone is a Prime subscriber, they will be captive Amazon customers but that hasn’t happened yet.”
Walmart and Amazon have both spent heavily to build up their Indian presence, occasionally engaging in one-upmanship. In July 2014, Amazon revealed $2bn in investments only a day after Flipkart announced a $1bn fundraising, the largest by an Indian start-up at that time.
The competition has been costly. Losses at Flipkart Internet, which manages its marketplace, rose 51 per cent to 43.62bn rupees ($532mn) in fiscal 2022. At Amazon Seller Services, the owner of its Indian marketplace, losses were 36.49bn rupees, down 23.1 per cent from the previous year.
Questions about Amazon’s commitment to India were raised after its earnings report in April failed to mention the country for the first time in five years. Amazon, which is cutting 27,000 jobs globally in response to slowing sales growth, has shut down fledgling food delivery, online education, wholesale distribution and book publishing operations in India.
“Amazon is not pumping too much money, (but) they are not starving it (India operations),” said Tracxn’s Goyal. “They are letting the situation sort of play out.”
For their part, Flipkart’s American owners have been pledging to stay the course in India. Judith McKenna, chief executive of Walmart International, told analysts in February: “The fundamentals of India remain strong and in fact, it’s strengthening all the time.”
A version of this article was first published by Nikkei Asia on May 12 2023. ©2023 Nikkei Inc. All rights reserved.