Flipkart must feel like the belle of the ecommerce ball.
FlipKart, the Indian ecommerce marketplace, “has approved an agreement to sell about 75 percent of the company to a Walmart Inc.-led group for approximately $15 billion,” according to Bloomberg. Flipkart generated $3.1 billion in revenue last year.
Walmart said it had no comment.
This comes a day after CNBC reported that Amazon not only offered to buy a majority stake in the company, but it also offered a breakup fee of $2 billion and a non-compete. Walmart’s previous bid was rumored to be around $10-$12 billion. Alphabet Inc. is reportedly also participating in the deal, investing $3 billion.
Sucharita Kodali, vp and principal analyst at Forrester, called it a hefty price to pay, but said it was made in the spirit of believing India is the next China.
“I think it’s a pyrrhic victory for Walmart,” Kodali said. “India is a tough market, and Flipkart now still has to spend lots to compete effectively against Amazon.”
The competition between the two companies continues to heat up, with analysts pointing to Amazon’s reported offer and interest in Flipkart as a necessary means to keep growing (and the size of India’s market doesn’t hurt). Walmart currently has about 11,700 retail stores across 28 countries; as of now, Amazon is in only 13 countries.
Kodali said that because of Amazon’s desire to hit it big in India, she suspects there was “a bidding war and a frenzy” to solidify the deal. “It’s quite difficult as an outsider, as a foreign company and own 100 percent of everything,” she explained. “Flipkart buys them a market share [and] makes it easier to deal with any compliance issues that are related to foreign investment.”
According to the India Brand Equity Foundation, by 2020, India’s retail market is expected to increase by 60 percent to hit $1.1 trillion. Additionally, the country is expected to become the world’s fastest growing ecommerce market, with ecommerce sales expected to jump from $30 billion in 2016 to $120 billion by 2020. When a nation has 530 million shoppers—expected by 2025—it’s not hard to see why both Amazon and Walmart want to plant their flags.
It was also a possible opportunity for Amazon to grow its Prime business in India. In the company’s annual shareholder letter, Amazon chief executive Jeff Bezos disclosed that Prime in India has “more than 40 million local products from third-party sellers” and that the program added more members in its first year in India than in any other regions. Bezos also wrote how the company is the “fastest growing marketplace in India.”
But now, unless Walmart hits a significant bump in the road, Amazon will need a Plan B.
Additional reporting by Lisa Lacy.