Wallmart to Buy Flipkart, Ola Invests in Vogo

Wallmart to Buy Flipkart

Wallmart is in talks to be the largest shareholder in Flipkart. From ET Tech:

The world’s biggest retailer is nearing a deal to buy a majority stake in India’s top online retailer for at least $12 billion, people familiar with the matter said. Flipkart’s major investors, including SoftBank Group, are on board with Walmart purchasing as much as 80% of the company, the people said, and they may complete the agreement in the coming weeks.

Wallmart is increasingly losing feet because of its customers gravitating towards eCommerce. In the US the biggest threat is of course Amazon. Especially after the latter’s purchase of Whole Foods last year. The purchase allowed Amazon to solve one problem it hasn’t been able to till then i.e. groceries. Because of limited shelf life, most grocery items run the risk of being rotten if they come from far parts of the country. So a traditional local storage and delivery model is a must-have. The very nature of groceries made it a hard problem for Amazon who thrives on centralized storage and operational excellence. With Whole Foods now part of America’s most admired company the need for Wallmart to address the Internet in general and Amazon, in particular, is not just necessary. It’s a matter for survival.

One way to do that is to look outside the US. The US is a stronghold for Amazon. The only two economies that can match the US in terms of spending are China and India. Because of their massive population sizes, they are an eye candy for every eCommerce player. Wallmart’s online foray into China has the same US problem named Alibaba. The online retailer sells anything and everything. And has massive distribution network apart from the formidable online presence. Wallmart entered by buying a couple of younger players. While the efforts have resulted in Wallmart gaining higher single-digit market share, it’s definitely not what they hope it could be. As such India represents a massive opportunity for Wallmart. Here the largest online retailer is not a conglomerate but rather a rookie upstart named Flipkart.

I wrote about Flipkart and India’s local eCommerce players last year:

I am clubbing them together because they are competing in same eCommerce space. Flipkart is the poster child of India’s tech ecosystem. Founded by two brothers in 2007, it’s the highest valued startup in the country. And the idea is clearly inspired by Amazon. Actually, the founders worked there before coming back to find their own. They are the largest player in the category with every third Internet user in India being a user of either their website or app. Earlier this year eBay invested in Flipkart and as part of the deal, Flipkart now owns eBay India too (though the later operates separately).

Together, as of now, Flipkart, Snapdeal, and Amazon own 75% of the market share. But it’s Snapdeal that seems in hot waters moving forward. From Tech in Asia:

Amazon’s commitment of US$5 billion to the relatively open Indian market, after finding the going tough in China, transformed the market dynamics. Flipkart and Snapdeal, which were in a race to grab market share with discounts, suddenly had the rug pulled from under their feet.

Amazon could offer better prices as well as selection and back it up with world-class services like Amazon Prime Video. The biggest loser was Snapdeal, which saw its market share dwindle. Flipkart managed to stay the course and inspired sufficient confidence for Tencent, eBay, and Microsoft to infuse it with fresh funds.

This leaves three big players in the market – Paytm ecommerce backed by the cash-rich Alibaba, the rejuvenated Flipkart, which could achieve a bigger market share through the acquisition of a marked-down Snapdeal, and Amazon.

Personally, I believe the news is troublesome for Flipkart too. Recent rejuvenation aside it’s dangerous to play in the same field as Amazon and Alibaba. Both can go on and on without making a dime. The longer it goes more trouble it spells for Flipkart.

Sorry for the long excerpt. But it nails down what brings Flipkart to the table. The deal presents a rather unique opportunity for both companies. For Flipkart, it solves the spending problem. They can compete with Amazon head-on using the money from Wallmart. And that is no less than $12B. And for Wallmart, it’s an opportunity to be the market leader ahead of Amazon, for once.

Ola Invests as Lead in Vogo

From ET Tech:

Vogo, a three-year-old startup, operates a scooter-sharing network which allows users to pick up the vehicle from designated pickup points throughout the city and drop them at any other designated point at the end of the ride.

Vogo’s funding comes as another startup, Metrobikes, is in advanced talks to raise $10 million from top-tier venture capital firms Accel and Sequoia, as ET reported in February.

“Ola’s investment in Vogo is important. India has the largest two-wheeler market in the world. It does make sense for the company to ensure they can capture that market in the long run,” said an analyst, speaking anonymously to ET.

It makes sense for Ola too. It’s perfectly in line with what I said when Ola acquired Ridlr. Acquire as much as transportation lifecycle of rather heterogeneous Indian consumer as possible. To curry up Softbank for an Uber exit.