Flipkart ups physical retail presence to take on rivals, boost business

26/01/2020

Bengaluru: Walmart-owned Flipkart may absorb Walmart India’s wholesale business, which includes 28 Best Price stores and three warehouse properties, as the two groups look at consolidating operating units and driving synergies, said people in the know.
If the amalgamation goes through, Flipkart will acquire a sizable physical retail footprint, which will likely complement its core e-commerce business.
Flipkart, which operates Myntra marketplace and PhonePe payments app, will use Walmart India’s centres as stocking and fulfilment units for fast-moving items, such as groceries, consumer packaged foods (CPGs), and kitchen inputs, the sources said. This will enable faster hyperlocal deliveries of these items.
According to a media report, Flipkart may also use these units to strengthen its own business-to-business (B2B) sourcing business, which will now be focused on selling inventory to kirana stores. A spokesperson from Flipkart declined to comment on the matter.
In September, Flipkart had said it brought onto its platform 27,000 kirana stores in non-metro cities to expand its reach. Taking those partnerships a step further, the e-commerce player may now start supplying to them as well. The move follows the launch of JioMart, the e-commerce venture by Reliance Industries, which has partnered with thousands of kiranas to sell on JioMart, and also buy through it.
“The customer base of Flipkart and Walmart wholesale is very different. Flipkart’s customer base is consumers, while Walmart’s is quasi-consumers,” said Devangshu Dutta, CEO at retail-focused consulting firm Third Eyesight. “But as fulfilment points or inventory holding points, there would definitely be synergies.”
The development comes at a time e-tailers are taking an omnichannel approach to grow business. In August 2019, Amazon had signed a deal to acquire 50 per cent in a joint venture with Future Group, the operator of Big Bazaar and Easy Day chains, which also gave the former a stake in Future Retail.
As part of the deal, Amazon India has become the authorised online sales channel for all Future Retail stores. Amazon also owns 5 per cent in the Shoppers Stop chain.
“Flipkart’s digital capability and Walmart’s supply chain will create competition for Amazon and Jio,” said Vishnu Gullipalli, CEO and solution advisor, Retail Insights, a retail technology consultancy firm.
“Flipkart leadership in the B2C segment will help extend its position in the B2B market, especially in the grocery category. Flipkart last-mile delivery strength will make the B2B2C space relatively exciting,” said Gullipalli. Walmart India was set up in 2007 as Bharti Walmart, a joint venture between Walmart and Bharti Enterprises. The JV was dissolved in 2013. Walmart has faced challenges scaling the business in India, both before and after Bharti Enterprises’s exit. In FY19, it posted a Rs 172-crore loss; it earned Rs 4,065 crore as revenues. “If you look at their growth strategy medium- to long term, they are tapping into India’s retail sector. They are trying to be a retailer in India. Walmart had to follow the wholesale route because its JV with Bharti fell through.
Amazon is following a financial portfolio route. One way or the other, the target is to be a retailer,” said Dutta.

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