The Indian retail sector is set to witness the clash of the titans as Walmart, Amazon Inc. and Alibaba Group is all set to engage in a war as each of the companies strive to expand their footprint in India. Many analysts are predicting that this would result in a massive shake up of the retail market in India.
The $16 billion deal to acquire a majority stake in the largest e-retail of India – Flipkart, has been closed, Walmart said last week. So far this is Walmart’s biggest acquisition.
And according to media reports, large investments are being eyed now by Alibaba and Amazon in the Indian retail space.
There have bene reports that claim that a $5 billion investment in a joint venture with Reliance Retail is being considered by Alibaba. Reliance Retail is the largest retailer in India in terms of sales. This is being done in part to counter the competition from Amazon and Flipkart.
On the other hand, there are also reports that suggest that Amazon could invest in the Aditya Birla Group-owned grocery chain, More.
Talks with other Indian retail chains including Future Retail have reportedly also been held by Alibaba.
More than $5 billion has bene invested in the Indian market by Amazon in the last few years because India is the fastest growing market for the American e-retailer. In the US market there is a direct6 competition between Amazon and Walmart while in the Chinese market, Alibaba and Amazon compete head-to-head.
There are some concerns among experts that there could be potential long term negative impacts on the Indian retail segment because of Walmart’s push into India especially for those small brick and mortar retailers in the country. there are reports of a nationwide protest being planned by a nation-wide trade lobby group to protest against the Flipkart acquisition. The unorganized sector in India covers almost 95 per cent of the Indian retailing market which translates into huge opportunities for the organized retail chains with huge deep pockets.
Currently, over 95% of India’s consumer retail market remains unorganised, representing a huge untapped opportunity for organised retail chains with deep pockets.
While 100 per cent foreign direct investment in multibrand retail is not allowed in India to safeguard the interests of the local grocers, but e-commerce with the marketplace model can have 100 per cent FDI. According to reports the Indian government is mulling a proposal to allow 49 per cent FDI in e-commerce firms that use the inventory model. Walmart in its recent statement said its future investments into India will be directed at supporting farmers, supply chain development and reducing food waste.
There is also a noted change in strategy of large retailers for the Indian market and where the business model are being shifted to hybrid ones – offline and online, as is reflected in Walmart’s acquisition of Flipkart and Amazon’s interest in More.
“While e-tailers have got their growth mojo back, everyone is starting to realise that pure online models will only let them capture limited pie,” said Mrigank Gutgutia, engagement manager with RedSeer Management Consulting.
“There is a need for change,” he added.
(Adapted from BusinessInsider.com)