Amazon vs. Flipkart

Amazon vs. Flipkart

Amazon vs. Flipkart 2018 (Walmart-India)

Retail behemoths Amazon and Walmart(flifcart) are looking to bring their US rivalry to India by buying into Flipkart. The stakes are high and the winner will determine the future of e-commerce in India

Bengaluru: Back in 2009, the size of the Indian e-commerce sector was less than $50 million and modern supermarket stores were still finding their feet. Inc., the world’s largest online retail firm, had not even started seriously evaluating the Indian consumer Internet story, let alone invest in it. Walmart Inc. had just opened its first wholesale store in India in partnership with Bharti Enterprises, and was still plotting its strategy to open supermarket stores once the South Asian nation allowed foreign investment in retail.

Flipkart, founded by Sachin Bansal and Binny Bansal (not related) in 2007 as an online seller of books, was far from a household name. It had just about managed to raise $1 million from Accel Partners India.

Yet, it was around that time in 2009, that the turning point for Indian e-commerce—and by default, Flipkart—arrived in the form of a hitherto unknown investment firm, Tiger Global Management, and its reclusive fund manager, Lee Fixel.

Fixel, at the time, made an outsized bet of $10 million on Flipkart at a valuation of roughly $40 million—which was equivalent to the size of online retail in India at the time.

Cut to nearly a decade later, that seemingly outlandish cheque of $10 million has acquired near-mythical status.

Since that moment in time, Flipkart has raised well over $6 billion and emerged as India’s most valuable Internet start-up, Amazon has entered India and pumped in at least $5 billion, Japan’s SoftBank Group Corp. has set aside nearly $10 billion for investments in India and India’s consumer internet economy is projected to touch $100 billion over the next decade.

And, in a sign of how swiftly things have turned on their head, Walmart, the world’s largest bricks-and-mortar retailer, is in advanced talks to pump in several billions of dollars into India through an investment in Flipkart, according to five people aware of the talks.

Separately, Amazon, which operates its own online marketplace in India, has initiated talks to buy a majority stake in rival Flipkart, another two people said. Amazon may soon submit a bid for Flipkart, these people said, while adding that a deal with Walmart is more likely to go through.

If Fixel’s initial $10-million investment in Flipkart (since then, Tiger has pumped in at least $1 billion into Flipkart) literally triggered the birth of modern-day Indian e-commerce, Walmart’s proposed investment in Flipkart is set to take e-commerce to the next level and place it well and truly in the global league of Amazon and China’s Alibaba.

If a Walmart-Flipkart deal does go through, the battle between Flipkart and Amazon is unlikely to conclude anytime soon over the next decade. At stake will be several billions of dollars in investments from two of the world’s most deep-pocketed companies.

On the other hand, if Amazon ends up buying a majority stake in Flipkart, the combination would become India’s undisputed No.1 in online retail platform with a global scale.

If a Walmart-Flipkart deal does go through, the battle between Flipkart and Amazon is unlikely to conclude anytime soon over the next decade

Walmart and Flipkart have held talks earlier as well.

Initial talks between the two companies were held in 2016 when Flipkart was struggling to fend off a rampaging Amazon. It had lost significant market share to the American online retailer, which was on an unprecedented investment spree in India. Those initial talks did not lead anywhere, but Flipkart continued to be on Walmart’s horizon in the 18 months since then, especially in light of its mammoth fund-raise last year from investors led by SoftBank, China’s Tencent Holdings, Microsoft and eBay. In two separate tranches, Flipkart mopped up nearly $3 billion—nearly half of the $6 billion that it has raised overall since it started out in 2007.

Talks for a Walmart-Flipkart deal resumed in earnest late last year, including key players such as Tiger’s Fixel, Flipkart chief executive officer Kalyan Krishnamurthy, founder-chairman Sachin Bansal and a host of top executives from Walmart, including chief executive Doug McMillon. In fact, Fixel, Flipkart’s biggest backer and key board member, did visit Walmart’s headquarters over recent weeks to help put the deal together.

While both Flipkart and Walmart have so far not publicly commented on the talks, there has hardly been any attempt to conceal the fact that these discussions have taken place.

Over the past few weeks and months, Walmart executives have met with Flipkart’s major stakeholders—especially Fixel of Tiger Global—and leaders, including CEO Krishnamurthy and founder and chairman Sachin Bansal.

According to several executives and employees, top Walmart executives have also visited the headquarters of Flipkart in Bengaluru, as well as Flipkart subsidiaries such as Myntra. Walmart chief technology officer Jeremy King also visited Bengaluru in March and, in an interview with MintAsia, emphasized how India featured as a significant investment destination for Walmart. King, however, declined to comment on Walmart’s talks with Flipkart.

MintAsia spoke to more than half a dozen executives, investors and other people connected with the talks for this story.

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