What, why, how: Walmart & Flipkart deal
Everybody in the town knows about the $16 bn deal. It’s a marriage of e-commerce and traditional retail.
Everybody in the town knows about the $16 bn deal. It’s a marriage of e-commerce and traditional retail.
What is it really?
Kevin Hillstrom has helped big retailers like Lands End and Nordstrom. He has covered how e-commerce has evolved since 1997.
In 1997, it was a support channel for catalogue business.
In 2005, e-commerce became support channel for retail businesses.
In 2011, e-commerce is main channel, while retail is the supporting channel.
Worth reading; his article on the interplay.
Why this deal now?
Flipkart sustains on making huge losses, while Walmart sustains on profit. This deal didn’t make sense. I wrote to Kevin yesterday asking for this thoughts.
According to him retailers acquire because of strategy teams and available cash. Walmart has both.
He wrote,”
At least four things could be happening.
(1) Strategy team is wrong.
(2) Strategy team sees a path to profitability.
(3) Integration reduces expenses (i.e. distribution centers) yielding profit.
(4) Purposely losing money to prevent a competitor from acquiring the brand.”
How will this impact local businesses?
Sandeep Murthy dissected the deal. He thinks it will help Indian businesses.
There is opportunity for businessmen to build direct to consumer brands. Some example are Chumbak, Sleepy Owl and Bhane.
Delhi-NCR is apt for building such brands. It has the consumers, spending power, and access to technology.
Once in a lifetime opportunity for businesses as Amazon and Walmart fight it out. Expect more help from both to grow the business.