Walmart is the world‘s largest retailer, with over 11,500 stores across 27 countries. The company has achieved remarkable success in markets like the U.S., Mexico, and China, but one country where it has no direct retail presence is India.
As the world‘s second most populous nation, India would seem like an obvious choice for Walmart‘s global expansion. The Indian retail market is expected to grow from $1.1 trillion in 2020 to $2.1 trillion by 2032, driven by rising incomes and consumption. So the question is, why is there no Walmart in India? The answer lies in India‘s unique regulatory environment and Walmart‘s creative approach to tapping the market.
India‘s Complex Retail Regulations
For decades, India has had strict laws limiting the ability of foreign companies to own and operate retail stores. These regulations were put in place to protect the country‘s vast network of over 13 million small, independent shops (known as kiranas) and MSMEs that form the backbone of local economies.
In 2006, India began allowing 51% foreign direct investment (FDI) in single-brand retail and 100% FDI in wholesale cash-and-carry operations. However, FDI in multi-brand retail remained prohibited until 2012, when the government began allowing 51% foreign ownership with certain conditions like 30% local sourcing and $100 million minimum investment.
Even with these changes, the multi-brand retail FDI policy remains very restrictive. States have the right to opt in or out of allowing foreign retailers. The local sourcing requirements are difficult for companies like Walmart to meet. As a result, no foreign multi-brand retailer has set up stores under this policy to date.
Walmart‘s E-Commerce Coup: The Flipkart Acquisition
Given the challenges of India‘s retail FDI policy, Walmart decided to take a different route to enter the market. In 2018, the company acquired a 77% stake in Flipkart, India‘s largest e-commerce platform, for $16 billion. It was a bold move that gave Walmart immediate access to India‘s rapidly growing online retail market.
Founded in 2007, Flipkart has grown to become India‘s leading e-commerce player through organic growth and strategic M&A. The company‘s revenue has grown from $23 million in FY12 to $4.8 billion in FY20. Some key facts about Flipkart:
- 45% market share of Indian e-commerce in FY20
- 300,000 registered sellers and 150 million product listings
- 200 million registered users and 100 million monthly active users
- 70% of customers from non-metro locations
- 100+ product categories spanning electronics, apparel, grocery, and more
- Flipkart-owned fashion retailers Myntra and Jabong hold 65% online fashion market share
- Partnership with Aditya Birla Fashion and Retail Ltd to expand into new categories
By acquiring Flipkart, Walmart gained a strong foothold in India‘s $84 billion e-commerce market which is expected to surpass $350 billion by 2030. The deal allows Walmart to compete with Amazon, which has invested over $8 billion in India since 2013 but remains second to Flipkart.
Flipkart vs Amazon: The Battle for India‘s Online Shoppers
The Flipkart acquisition set the stage for an epic battle between Walmart and Amazon for the hearts and wallets of India‘s online shoppers. The two companies are head-to-head in terms of key metrics:
| Metric | Flipkart Group | Amazon India |
|---|---|---|
| GMV | $10.5 Bn (FY21) | $11.5 Bn (CY20) |
| Monthly Active Users | 100+ Mn | 100+ Mn |
| App Downloads (2020) | 250 Mn | 220 Mn |
| # of Sellers | 300,000 | 700,000 |
| # of Pin Codes | 19,600+ | 19,400+ |
Both Flipkart and Amazon are heavily focused on mobile commerce which accounts for nearly 75% of online sales in India. They are constantly innovating on selection, delivery, affordability, and regional customization to attract the next 200 million online shoppers.
Some of the key battlegrounds are:
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Festive Season Sales: Flipkart‘s Big Billion Days and Amazon‘s Great Indian Festival are now the largest shopping events in India, generating billions of dollars of GMV in the October holiday season. Discounts, flash sales, and exclusive product launches are used to attract deal-hungry shoppers.
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Grocery E-commerce: Online grocery has been the fastest growing e-commerce segment fueled by the pandemic. Flipkart Supermart and Amazon Pantry are expanding dark store networks and partnering with local shops to enable 2 hour delivery and cater to rising demand for daily essentials.
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Affordable Shopping: Both companies are innovating to reach price-sensitive consumers beyond the metros. Programs like Flipkart Pay Later and Amazon Pay EMI offer flexible credit options. Partnerships with kiranas allow shoppers to order online and pick up at nearby stores.
While Flipkart remains the market leader for now, competition is intensifying as Amazon doubles down on its Indian investments. Reliance Retail, India‘s largest offline retailer, is also making an aggressive omnichannel push supported by its Jio telecom arm. In this hyper-competitive environment, Walmart will need to continue supporting Flipkart‘s growth and innovation.
The Future of Retail in India
As India‘s economy recovers from the pandemic, retail spending is poised to bounce back. The $1.1 trillion retail market is expected to grow at a 10% CAGR to reach $2.1 trillion by 2032. Rising consumption will be driven by a growing middle class which is projected to expand from 50 million households today to 180 million by 2030.
E-commerce will be the fastest growing channel, increasing its share of retail from 4.1% in FY20 to 10.7% by 2024, according to IBEF. Online sales are expected to grow from $84 billion to $350 billion in the next decade. However, physical retail is also projected to more than double in the same period as modern trade gains share.
To win the Indian consumer, retailers will need to offer a seamless omnichannel experience across online and offline touchpoints. The lines between e-commerce and physical retail will blur with more retailers adopting models like click-and-collect, ship-from-store, and hyperlocal delivery. Customer centricity and personalization will become critical to earning loyalty.
Walmart‘s Flipkart acquisition gives it a strong position to tap into India‘s offline+online retail future. The companies have launched innovative programs to reach new audiences:
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Flipkart Wholesale: This digital B2B marketplace connects suppliers and small retailers with a wide selection of products and credit options. It is rebranding the Best Price cash-and-carry stores and aims to serve over 5 million kiranas and MSMEs.
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FlipkartQuick: This hyperlocal delivery service launched in Bangalore enables 90-minute grocery delivery by leveraging a network of kirana partners and self-employed delivery workers. It enables small shops to attract online demand.
At the same time, Walmart is leveraging Flipkart‘s talent and technology for its global e-commerce efforts. The companies co-developed an ML-based search engine that is now deployed on Walmart.com. Flipkart is building a global advertising platform that will enable brands to reach Walmart shoppers. Learnings from India are being applied to other growth markets.
While India is a challenging market to operate in given its infrastructure, fragmentation, and regulation, it offers tremendous potential that Walmart cannot ignore. With Flipkart, Walmart has found a way to not only tap into India‘s dynamic retail market but also accelerate its evolution into a global omnichannel player. How this bet plays out will have ramifications for the entire retail industry.
