walmart flipkart acquisition case study

A business journal from the Wharton School of the University of Pennsylvania

Where’s the Value? An Inside Look at Walmart’s Flipkart Deal

May 14, 2018 • 18 min read.

The $16 billion transaction says a lot about India’s e-commerce ecosystem, writes former Snapdeal exec Rajat Kumar in this opinion piece.

• Finance & Accounting

Rajat Kumar, COO of ABP Digital, who previously had a leadership role at the Indian e-commerce company Snapdeal and was a consultant at McKinsey, writes in this opinion piece that Walmart’s $16 billion deal to buy online retailer Flipkart says a lot about India’s e-commerce ecosystem.

Walmart’s much-anticipated $16 billion acquisition of Flipkart, India’s top e-commerce retailer , which was announced last week, brings to mind the opening lines from Charles Dickens’ A Tale of Two Cities : “It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of light, it was the season of darkness; it was the spring of hope, it was the winter of despair.” The deal is all those things — and more.

Hardly two years ago, Flipkart was being written off in VC circles. Back then growth was slowing, unit economics and profitability remained dreams, the Amazon juggernaut was gaining market share, and markdowns by current investors signalled to the rest of the investing community that the company was overvalued. At the center of it all was Tiger Global, a New York City-based hedge fund that had bet big on Flipkart and was worried about its Indian investments. In 2017 Kalyan Krishnamurthy, who had previously worked as a director at Tiger Global, became Flipkart’s CEO, replacing the founders, Sachin and Binny Bansal. The taps on discounts were opened; the focus on mobile phone sales was sharpened; and that was enough to woo SoftBank Vision Fund, the biggest of the big fish, which invested $2.5 billion.

Now, two blockbuster deals later — first with SoftBank , which provided some relief to Tiger, and the second with Walmart, which provides a profitable exit to SoftBank — things have changed, and how. But apart from ESOPs being liquidated and many millionaires being created, let us remember that little of the valuation will find its way to India. Most of the money will move from Walmart to Tiger Global, SoftBank Vision Fund and Accel, which have invested heavily in Flipkart during the past two years. According to media reports , while Tiger Global will make $3 billion on this deal, both SoftBank Vision Fund and Accel will reap substantial windfalls. Flipkart’s Indian founders and employees will end up with a small slice — perhaps around 10%. How I wish there were a bigger India wealth role in this story, but I guess something is better than nothing. Even 10% of $16 billion is not exactly chump change.

More importantly, let us assess what this transaction could mean for Walmart, for Amazon, for the e-commerce ecosystem, for Indian traders and manufacturers and for consumers.

“Walmart’s sourcing might, combined with Flipkart’s e-commerce prowess, can and should be a global play, not just an India play.”

E-Commerce 101

Before we begin, consider some basic facts about e-commerce in India:

• E-commerce operates in four broad verticals — electronics (including mobile phones); fashion; household stuff (ranging from furniture to bedsheets to brooms); and fast-moving consumer goods (FMCG). Of these, the most sales value comes from electronics, including mobiles, and the most transactions come from fashion.
• Despite regulations that specify that retail with overseas funding has to be a marketplace (i.e., it cannot sell its own inventory but should only be a platform for other merchants), no barriers prohibit some suppliers (less than 25% of total business on the platform) from being affiliated with the retailer. WS Retail (for Flipkart) and Cloudtail (for Amazon) are examples. This also helps from a customer perspective since the perception of quality is stronger with such branded suppliers.
• In a typical retail business, the cost of customer acquisition is measured against the long-term value of a customer (driven by his value per order, number of orders, profit per order, typical number of years before churn). I have never heard any e-commerce discussion in India even mention these metrics. The metric I have heard used most often is gross sales value (GSV) perhaps in the absence of another simple metric in a growth business fueled by discounting and loss leadership. By the way, the way GSV is measured changes from company to company. Firms either use maximum retail price or MRP to measure GSV, or the retailer listing price, but I do not know of any company that uses the actual price charged to a consumer for calculating GSV.
• Since market leadership is measured in terms of GSV, and funding is dependent on it, it is pertinent to note why GSV is important. GSV stems from a classic marketing and finance model, with the assumption that higher sales automatically mean a larger number of consumers. This, in turn, means a higher mind share as well as a stronger bottom line (with the assumption that products should not be sold at a loss).
• In a typical VC-led high growth industry, this usually does not hold true, and hence in e-commerce, GSV levers and profitability levers are separate from each other. For example, reducing prices by 10% on a mobile phone can usually ensure that GSV for that phone triples, but clearly, it may make a significant dent in the bottom line with no significant long term gain in consumer mind share. (Also, especially for mobile phones, discounts can lead to trade buys kicking in, where offline retailers pick up discounted stock for later reselling at full rates.) Moreover, GSV does not account for the number of returns, which should not only not be counted in sales done on the platform but can also contribute to significant losses because of free returns, damages and frauds.
• E-commerce has not yet fully captured the imagination of Indian consumers other than those living in metros and big cities. While orders are shipped to smaller cities, the numbers are not commensurate with the share of population living in these parts of the country.
• E-commerce prices are much lower than those one would get in, say, a mall. However, barring mobile phones, branded products and FMCG, the prices may still not be able to beat prices of shops in local markets. These shops do not pay rent, do not need high profits for owner sustenance, deal in unbranded goods, and may have innovative ways of avoiding taxes such as GST that ordinary mortals may not be able to imagine. In other words, the second rung of e-commerce penetration in India will be a long-drawn affair, unlike the current phase, and will likely take an omni-channel route.

Below, I will discuss the bottom-line impact of the deal on Walmart, which, if one were to go by regulations, should never be a concern since a pure marketplace model as is mandated by regulations is nothing but a technology platform. But by that logic, e-commerce should never have been a loss-making industry in India to begin with, so I would rather base my thoughts on reality rather than on theory.

“How I wish there were a bigger India wealth role in this story, but I guess something is better than nothing.”

Flipkart vs Amazon — and the Value to Walmart

How does Flipkart compare to Amazon in India? Since both companies hold information close to the chest, a broad statement will be inaccurate and inappropriate. Reports suggest that Flipkart leads in GSV over Amazon, while Amazon leads in units sold. Amazon is also believed to have overtaken Flipkart in metros (where the most purchasing power lies).

Flipkart leads in the fashion vertical. Its subsidiaries Myntra and Jabong are completely focused on that industry. Flipkart also leads in mobile phones, which accounts for a significant portion of its total GSV. Moreover, Flipkart has PhonePe, its payments solution, just like Amazon and PayTm have their own solutions. However, Amazon also seems to lead from a consumer share perspective. Reports suggest that Amazon was ahead of Flipkart on browser visits, app downloads and average daily active app users.

So what does Flipkart bring to the table for Walmart (apart from tailwinds about India’s macro story and retail potential, which has been beaten to death)? The implications of gaining leadership in the fashion vertical are that Flipkart has higher bargaining power with suppliers, especially fashion brands. Myntra and Jabong (both owned by Flipkart) are positioned as fashion destinations and not commodity retail destinations. Just this difference in perception automatically means a difference in pricing power.

Fashion prices are not easy to compare across websites, and therefore a price premium can be charged once a consumer starts browsing. For example, what is easier to compare — the price of a Sony Bravia 42-inch television or a sky-blue Arrow full sleeve shirt, size 42 with a specific stripes pattern? Moreover, given the price points, a consumer’s incentive to compare is also lower than in the electronics segment. Hence, fashion is a goldmine from a P&L perspective, if it is done right. If not done right, though, the following costs kick in: Fashion items usually have an unfavorable value-to-shipping cost ratio and also have a higher propensity for return (mismatch in size, color expectations, material expectations, etc). Such return costs are a drag for both the retailer and suppliers.

Moreover, the retailer is stuck with unsold inventory. (Branded fashion deals are usually not done on a marketplace model and there is some level of retailer risk involved.) This imposes a spoilage risk as well as the possibility that unsold inventory may have to be liquidated at a loss. Overall, the Flipkart fashion vertical seems to be doing well, with reports of Myntra looking to break even this year, while maintaining a healthy growth trajectory.

Flipkart’s lead in the mobile market also has significant implications. For one thing, mobile phones are highly amenable to online purchase through e-commerce platforms. They are high value, have high demand, are not bulky and perhaps cost Rs 40 (or $0.75) to ship. Moreover, a consumer who wants to compare multiple models side by side in peace may take two or three visits before making up his mind (and hence would hate pushy salespeople in a physical store). For these reasons, mobile phones were one of the first few items to show significant traction on e-commerce and take significant share from offline retail. Even today, most searches in e-commerce are about mobile phones, which are a significant symbol of identity, especially for Indian youth.

Flipkart is a leading destination for phones in India — be it the deals it has with Motorola or Xiaomi (which Amazon has slowly tried to wrestle into), or just the sheer number of exclusive launches it does in a year. It is now an indispensable site for manufacturers to list their phones. And with the high volume comes high bargaining power on margins. In addition, a lead in mobile phones market share automatically means an entry into a high-turnover segment with further scope to gain share versus offline retail.

“E-commerce has not yet fully captured the imagination of Indian consumers other than those living in metros and big cities.”

The downside, however, is that mobile phones are a double-edged sword; they usually do not make money. In fact, they are loss leaders for e-commerce. Prices are easy to compare and hence there is a simple downward spiral to woo the consumers, even at a loss. The margins are way lower than in fashion, and usually hover around 7% to 10%. While shipping costs are low, losses on account of fraud or returns can be gigantic. And if platforms want exclusive deals with manufacturers, they have to provide sell out targets (usually guaranteed) to gain that exclusivity. This means that the loss on account of unsold inventory may potentially hit the retailer rather than the manufacturer.

In summary, once the Flipkart deal goes through, Walmart will inherit a business that is a leader in both high-margin business (fashion) and high-GSV business (phones). Still, the latter may continue to remain a bigger drain on the bottom line than the former, despite providing a cushion in the vanity metric of GSV.

Did Walmart Overpay?

Much ink has been spilled discussing the $16 billion acquisition price, so it is worth discussing if the valuation was correct. In my view, beauty lies in the eyes of the beholder. From a pure RoI perspective, the valuation may not appear to be justified. However, one must note that most technology businesses have much of their value embedded in terminal value, or in cash flows that appear after a 15-year to 20-year horizon. The exponential growth curve in a growing market makes it very tough to accurately model the right value in such cases. As a result, most venture capitalists speak in terms of revenue multiples rather than EBITDA multiples. The only concern that Walmart may have is how improving unit economics (especially on the electronics side) will impact growth and consequently the value embedded in terminal value.

The bigger question is whether Walmart had a choice: Could it have invested its war chest in India and hoped to reach Flipkart levels organically, choosing the path that Amazon chose earlier? Perhaps it could have, provided it had technology and e-commerce expertise, but the company has not been able to convincingly demonstrate this elsewhere. (For example, Walmart’s plan to collaborate with Bharti to build its retail presence in India did not take off as planned, so perhaps it remains wary of organic plays in India, especially with regulation stacked against it.) Moreover, in such a scenario, it would have to be wary of SoftBank pumping in more money into Flipkart to counter Walmart, or prepping it for listing and using the funds to crush Walmart India before it could gain a proper toehold.

In the medium term, Walmart may be able to do some smart moves with Flipkart. I am sure it has built these factors into its valuation — and if it has not, it should have. Walmart and Flipkart will have better bargaining power with suppliers (imagine the global might of both U.S. and India volumes while negotiating rates with Chinese suppliers). Walmart could also apply its e-commerce lessons from Flipkart and implement them in the U.S and other global plays (Jet.com, etc). I imagine this would have a much greater bearing on Walmart’s thinking than a pure India play. After all, few companies globally have been able to withstand Amazon’s onslaught, as Walmart knows from previous experience. Walmart’s sourcing might, combined with Flipkart’s e-commerce prowess, can and should be a global play, not just an India play.

“Even today, most searches in e-commerce are about mobile phones, which are a significant symbol of identity, especially for Indian youth.”

Implications for Indian Retail

Let’s face it — Indian manufacturing and retail are inefficient. The warped ratio of real estate rents to product value, inefficient transportation and infrastructure, or the sheer number of intermediaries, make the final consumer price way higher than it should ideally be, considering the purchasing power of average Indians. Of course, high tax rates on sales worsen the situation, offset by rampant tax evasion. Having said that, I do not see any immediate implications for the retail sector, except for a tailwind-driven, slow erosion of sales towards e-commerce.

Over time, though, I see this situation as one of which both small retailers and big players like Future Retail (Big Bazaar) should be wary. Apart from both Amazon and Flipkart developing the significant (and automated) warehousing infrastructure that has worked so well in the U.S., and which has a role to play in the Indian context, I imagine that Flipkart under Walmart may test some omni-channel possibilities as well (despite regulatory hurdles), especially seeing the success of DMart and the reach of Big Bazaar. It would also be much better positioned than Future Retail and DMart to open physical stores in smaller towns — purely as a window to e-commerce as well as a means to ease the returns process.

A point that is often missed is that for the first time, all the leading players in Indian retail are strategic players and not VC driven start-ups. This means that the VC pressure that often accompanies a funded start-up to show growth will be replaced by logical, long-term horizon decisions. Be it Flipkart, Amazon, Big Bazaar or DMart, I now foresee a lot more real value creation for consumers, rather than a primarily discount-led play that is nothing but a transfer of value from one player to another. To that extent, I foresee that losses will stabilize, suppliers will be squeezed (beware small manufacturers), and loyalty programs and customer data will play a key role in market share battles. I personally look forward to enjoying the replicas of Cola wars all over again.

I have mixed feelings about what Walmart’s Flipkart deal shows about India’s regulatory direction. Despite clear mandates about not allowing foreign capital in retail unless it is a pure platform play, we now have a situation where Indian e-commerce is pretty much being run on foreign strategic capital. Both Walmart and Amazon have their own store brands as well, and at least in spirit, cannot be called pure platform plays. I would have loved to see an Alibaba being created and sustained in India. It seems, though, that Indian regulations are not geared towards creating homegrown behemoths in the internet age.

China has done a great job in this regard, by not allowing foreign players in internet-driven sectors, thus ensuring the rise of Chinese internet giants such as Alibaba, Baidu and Tencent. Without similar protection, basic economics dictate that established overseas players with deeper pockets will always win an internet platform battle, since by its very nature, the internet is geared towards promoting global monopolies or duopolies. Cases in point: Google, Uber, Amazon, Facebook, AirBnB, etc.

“In summary, once the Flipkart deal goes through, Walmart will inherit a business that is a leader in both high-margin business (fashion) and high-GSV business (phones).”

I have two final comments about the role of capital. No player (even a Big Bazaar) was able to create this kind of scale with Indian capital, so is Indian capital slow to react? Why would a Flipkart even get a chance to rise with both Reliance and Future Retail already present in the market?

My view is that, in general, the Indian mind is not focused on innovation. The education system based on a “repeat after me” style of teaching; the societal mindset which looks down upon a young person doing a summer job in a TGIF or McDonalds; the parental pressure to do a “job” rather than experiment with passion — all these ways of thinking carry forward in a typical Indian work environment. The result is that innovation has limited (or no) budgets allocated; the boss is always right; and no middle manager would want to be in a situation where, despite a grand vision and a potential payoff of billions, the risk of failure can be attributed to him. So, unfortunately, I do not believe that traditional Indian capital is geared towards a 20-year horizon. (I mark Reliance Jio as an exception — but that is a story for another day.)

The big takeaway from the present deal is that deep pockets win. This is a maxim that has been demonstrated over and over again, especially in B2C technology plays. A certain disdain for capital efficiency, a focus on gaining share and a relentless focus on killing competition define today’s leading companies. Flipkart would have been in the news for very different reasons had it not been for the timely fund infusion by SoftBank in 2017. Growth had stalled, the annual burn was high and unit economics were unsustainable. And yet, as part of the strategy of Lee Fixel of Tiger Global and Kalyan Krishnamurthy, Flipkart doubled down on not ceding market share to Amazon, whatever the capital burn. This in turn caught Softbank’s eye (whose earlier investment in Snapdeal was not working to its expectations).

As a result, Flipkart is now touted as a poster child of Indian start-ups. The critical question in today’s age, which may require some rewriting of textbooks, is: What comes first, the business plan or the capital? Walmart’s Flipkart deal suggests it is the latter.

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17 The ‘Walkart’ of India: A Case Study on Walmart-Flipkart Merger

• Published: June 2022
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US retail giant Walmart has signed a definitive agreement to acquire a 77% stake in India’s largest e-commerce marketplace Flipkart with an investment of around $16 billion, making it the largest transaction in the history of the online retail space globally. The deal, which wiped away $10 billion of Walmart’s market capitalization as investors reacted negatively in early morning trade on the New York Stock Exchange, stands out for several exits. The biggest was Sachin Bansal selling his entire 5.96% stake for $1.23 billion and parting ways with Flipkart that he had founded in 2007 along with a friend from IIT, Binny Bansal (not related). Sachin was nowhere around at the Flipkart campus when the Walmart top team led by CEO Doug McMillon addressed employees in a town hall meeting. Another significant exit is that of Soft Bank, the largest investor in Flipkart. In a strange coincidence, the deal, valuing Flipkart at $20.8 billion, was announced to the world by Soft Bank Chief Executive Masayoshi Son in a webinar with investors hours before Walmart did so. He also confirmed that Soft Bank would get about $4 billion from its $2.5-billion investment in Flipkart last August. Flipkart’s valuation at $20.8 billion is a 75% increase over its previous valuation in the range of $11–12 billion last August. Out of the $16-billion investment, Walmart will put in $2 billion in new equity funding, while the rest will be utilized to acquire stakes of existing investors in the Bengaluru-based company. The case study focuses on Effect of regulatory restrictions in Indian Ecommerce Markets for Global MNCs.

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Walmart’s Acquisition of Flipkart: A Paradigm Shift in Retail Management Strategy—Current and Future Implications for Various Stakeholders

• First Online: 01 January 2020

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In May 2018, Walmart—a brick-and-mortar retail giant from the United States—announced buying a 77% stake in Flipkart—India’s largest e-commerce platform—for US$16 billion. As one of the largest acquisition deals in the online space in the world starts to take shape, this study is an attempt to analyze its short-term and long-term implications for the various stakeholders. The focus of this study is on the managerial implications of this acquisition, which includes Walmart’s India strategy, effects of the deal on Flipkart—its founders, top management team and financiers—and implications for Amazon. The study also delves on the macro implications of this acquisition which include effects of this deal on online and offline retail sector in India, take-aways for the Indian entrepreneurial ecosystem, lessons for e-commerce governance in India and the online picture beyond e-commerce.

In the years to come, the Indian e-commerce sector would witness more competition from foreign players either directly or indirectly and hence, it makes sense for them to strategize accordingly. What happens in the online retail market in India in the long run is a maze with many twists and turns. However, the consumer will have the last laugh in the short run. It is not Indians v/s aliens in the Indian e-commerce. As the bulk would be owned by foreigners, India will be the stadium where the grand game will be played out … with the Indian consumers cheering from the stands.

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Joshi, D. (2020). Walmart’s Acquisition of Flipkart: A Paradigm Shift in Retail Management Strategy—Current and Future Implications for Various Stakeholders. In: Thakkar, B. (eds) Paradigm Shift in Management Philosophy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-29710-7_4

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A timeline of Flipkart’s meteoric rise from humble beginnings to acquisition by Walmart

The biggest success story of Indian e-commerce started from a two-bedroom apartment in Bengaluru.

On Sept. 15, 2007, Sachin Bansal and Binny Bansal (not related) started Flipkart as an online bookstore. The two had known each other since 2005 when they attended the Indian Institute of Technology Delhi (IIT-Delhi) together and were colleagues at Amazon briefly.

Eleven years later, the world’s largest retailer, Walmart, has agreed to buy a controlling stake in the company, Softbank chief executive officer Masayoshi Son said today (May 09).

Flipkart’s journey has been nothing short of a roller-coaster ride. The company went from record-breaking investments and an acquisition spree to failed business experiments and devaluations—only to bounce back.

Here are the key milestones in the journey of the third-most-funded private company in the world.

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Walmart completes its $16 billion acquisition of Flipkart

Walmart announced over the weekend that it has completed a $16 billion investment in Flipkart that sees it become the majority owner of the Indian e-commerce company.

The deal was first revealed back in May and now it has closed after receiving the necessary approvals. It sees Walmart take a 77 percent share in the company, buying out a number of prior investors in the process and expanding its rivalry with Amazon to a new horizon. The investment capital also includes $2 billion in new equity funding which will be used for growth while the transaction was structured so that Flipkart itself can still go public. That latter point could mean that the Indian firm must go public within four years, as TechCrunch previously reported .

Flipkart will continue to be run by its leadership with Tencent and Tiger Global retaining board seats. Those two have remained investors in the business, alongside others that include Flipkart co-founder Binny Bansal and Microsoft. Walmart previously suggested that other allies would come aboard as investors . Google was strongly mooted, but so far there have been no strategic additions.

Walmart said that its plans for India will include investments that “support national initiatives and will bring sustainable benefits in jobs creation, supporting small businesses, supporting farmers and supply chain development and reducing food waste.”

As we previously reported , it also plans to use Flipkart as a “key center of learning” for the rest of its business across the world, and that includes its home market.

“Not only is [Flipkart] innovative [with the] problem-solving culture that they have, but they are doing some great work both in the AI space, how they are using data across their platforms but particularly in terms of the payment platform that they’ve created through PhonePe. All of those things we can learn from for the future and see how we can leverage those around the international markets and potentially into the US as well,” Walmart COO Judith McKenna said back in May when the deal was announced.

Flipkart’s business could also get a whole lot more transparent since its quarterly results will be reported as part of Walmart’s earnings. Although they will be part of its international business so that might provide some protection from direct scrutiny.

International Research Journal of Social Sciences______ISSN 2319–3565 Vol. 9(2), 21-31, April (2020) Int. Res. J. Social Sci.

Case Study Walmart - Flipkart Acquisition: a case study Ritu Wadhwa Amity Business School, Amity University, India [email protected] Available online at: www.isca.in, www.isca.me Received 17 th November 2019, revised 20th December 2019, accepted 25th February 20 20

Abstract There are various reasons of increasing M&A however, most acquisitions and mergers are done to reduce competition. Year 2017 was the booming year for mergers and acquisition activity specially in e -commerce sector as this sector saw M&A worth $2,112 million according to report of Grant Thornton. Further, India has a potential to nurture more than fourfold to approx. $150 billion by the year 2022, affected by increasing income and heave in the internet users, as per the latest reports. Amongst all e-tailing segment is the fastest growing. Making the biggest acquisition in e -tailing sector this report puts light on the Most recent case of American retail giant which has acquired Flipkart in a competition with Amazon . Furthermore, it divulges the viewpoint behind the huge acquisition and how this will contribute to the Indian economy progression. The strategy behind Walmart-Flipkart allianc e is more than just taking on Amazon. For Walmart this alliance will make its entry into retail in India which was long awaited through e-commerce route by holding Flipkart’s hand. Following this acquisition, the industry has come under the lenses of lawma kers and regulators and the new draft e-commerce policy has been formulated which mentions stern regulations on online retail, including curbs on discounts, which has caused an uproar in the industry.

Keywords : Amazon, e-commerce, e-tailing, e-commerce, economic development, e-commerce policy, flipkart, walmart,

Introduction Objectives: i. To study the philosophy behind the Walmart - Flipkart acquisition. ii. To study major challenges faced by The purchase of Flipkart by Walmart characterizes a very Walmart while acquiring Flipkart. iii. To study the reasons of significant shift taking place in the global business model where high valuation of Flipkart despite of it being a loss -making customer value preposition is gra dually shifting from physical company. product to digitally delivered solution/service/experience – a shift that in BCG ( Boston Consulting Group) is called Parties to the Deal ‘servitisation’ 1. Most of the industrial companies have assured that their fastest growing business was due to digital services Walmart: Walmart Inc is an American multinational retail and solutions and not due to selling physical products. company which was originated by Sam Walton in the year 1962 and incorporated in the year 1969. It is headquartered in The importance of this change is basically the amalgamation of Bentonville. It operates number of hypermarkets, Discount the digital services with the physical product delivery. Retail departments and grocery stores 3. Currently Walmart has 11718 businesses are using it as offline and online delive ry model. As stores operating under 59 different names in 28 countries. In per the original business model the company is allowed to create financial year 20918 it generated a revenue of approximately of a new value preposition named ‘sachetisation’. Sachetisation $500.3 bill ion. It has expertise in the area of retail market and means an experience without consumption like Uber gives to supply chain management. point to point travel or consumer line personalisation exp erience that is provided by the Netflix to its customers globally 2. Thus, One of the biggest rival of Walmart is Amazon. Walmart online skills of Flipkart allow Walmart to create such more arrived India through a Joint Venture with Bharti enterprises in value prepositions. In addition to this, it will also provide a year 2007 and got its first store opened in Amritsar, P unjab in robust network of distribution to the physical supply chai n. This year 2009. means that Walmart can push Flipkart to the other markets very easily without putting an effort to make huge investments. Flipkart: Flipkart is an e-commerce company which was founded by Delhi IITians and former Amazon employees The acquisition is significant also because all other top M&A Sachin Bansal and Binny Bansal with just rupees 4 lakhs in year deals involving Indian companies relate to non -technology 2007. It is headquartered in Bengaluru, Karnataka . Binny sectors-mainly oil and gas, steel and metals, and telecom . Bansal and Sachin Bansal initially started their business in a

International Science Community Association 21 International Research Journal of Social Sciences______ISSN 2319–3565 Vol. 9(2), 21-31, April (2020) Int. Res. J. Social Sci. two-bedroom apartment of selling books online gradually this multiple take overs along the way in order to reach $3 billion in business grew and they started selling other products also such year 2016-17. There is a decrease by 50 percent in the revenue as clothing, footwear, accessories, beauty and grooming growth rate of the year 2016-17 as compared to last fiscal year. products, baby care products and toys, etc. It employs nearly The growth rate for year 2016-17 was recorded as 29 percent. 8000 permanent employees and more than 20,000 contract The revenue of the Flipkart are shown in rupees amount in the workers. graph given below. Today Flipkart is one of the most valued e- commerce company which is imposing a peak valuation of over It is the first e-commerce company to introduce “cash on $15 billion. delivery” method of payment which is one of the biggest factor in its success. The organization has likewise figured out how to The company has made at least 10 acquisitions since the time of build up itself in a stuffed market, surpassing once close its existence which includes online lifestyle retailers like Myntra opponent Snapdeal which imploded in 2017 4. and Jabong which have made Flipkart a leading company in this segment by a wide margin. Its revenues increased over the period from less than $1 million in 2008-09 to $75 million in 2011-12 and augmented, with

Figure-1: Profitability of Flipkart 15 .

Table-1: Acquisitions made by Flipkart 16 . Year Company 2017 EBay 2016 PhonePe 2016 Jabong 2015 FX Mart 2015 Adiquity 2015 Appiterate 2015 MayMyIndia (Minority Stake) 2014 Myntra 2012 Letsby 2010 WeRead

International Science Community Association 22 International Research Journal of Social Sciences______ISSN 2319–3565 Vol. 9(2), 21-31, April (2020) Int. Res. J. Social Sci.

Flipkart's funding Oct 2009: $1million from Accel partners journey

November 2009: $10 million from tiger global Management

June 2011: $20 million from Tiger Global

August 2012: $150 million in round led by South Africas Naspers , along with Accel, ICONIQ Capital and Tiger Global

July 2013: $200 million at a pre-money valuation of $1.3billion from the same 4 investors; gains "unicorn" status

Oct 2013: $160 million from investors including Morgan Stanlay, Dragoneer Investment Group, Sofina, Tiger Global and Vulcal Capital May 2014: $210 million from Russia's DST Global

July 2014: $1 billion from investors led by Naspers and Tiger Global: post money valuation of $7 billion

December 2014: $700 million from new investor from new investor led by Stead view capital, Qatar Investment Authority and others; hits a valuation of $12 billion July 2015: Finishes raising another $700 billion from existing investors incluing Tiger Global: hits a valuation of $15 million

April 2017: $1.4 billion from Tencent , ebay and Microsoft . the valuation falls to $11.6 billion.

August 2017: $1.4 billion from Soft bank

Figure-2: Journey of Flipkart 17 .

Corporate structure of flipkart became the ultimate holding company under which many subsidiary companies operate some registered in Singapore and Flipkart Pvt ltd. operates in a intricated warren of inter some in India. connected and independent entities. The structure of Flipkart started to form in the year 2008 when the founders Sachin There are three subsidiaries incorporated in Singapore under Bansal and Binny Bansal were looking for investors who would Flipkart Ltd. Namely – i. Flipkart Market private ltd. ii. Flipkart invest in their business. In June 2009 Flipkart got their first Logistics Private Ltd., iii. Flipkart Payments private limited. 5 investment of $1 million from Accel partners . But since Foreign Direct Investment wasn’t permissible in online retail These three companies in turn have 5 subsidiaries under them segment in India, so they began to develop this complicated which are incorporated in India namely – i. Flipkart India maze of organisational structure to accommodate the foreign Private limited (wholesale B2B company), ii. Flipkart payment money. It got itself registered in Singapore in 2011. And gateway service private limited (It provides payment gateway

International Science Community Association 23 International Research Journal of Social Sciences______ISSN 2319–3565 Vol. 9(2), 21-31, April (2020) Int. Res. J. Social Sci. services through the product called payzippy), iii. Flipkart investment and this will lead to an increase in EBITDA by 2 Internet Private limited (owns Flipkart.com and delivers times. The debt will also increase by more than $10 billion. technology platform to all e-commerce companies), iv. Digital Media Private Limited (dormant company), v. Digital Other clauses of the deal Management Private Limited (runs Ltsbuy.com). vi. However, as Flipkart is a privately held company , the company refuses to The exit value is a critical element in the return for the private comment on its structure or shareholders. equity firm and is considered carefully before the investment is undertaken. One of the exit route that private equity firms use is The Deal: Walmart has wrapped up Flipkartacquisition for $16 IPO. In an IPO company’s equity shares are offered for sale to billion (about Rs 1.05 lakh crore) to purchase a 77% stake in general public. The deal includes a clause that the company will Flipkart. The decision to purchase a majority stake in online issue IPO after 4 years of closing the deal at a valuation which retailer Flipkart marks the biggest e-commerce deal in the will not be less than the compensation of $16 billion paid by 8 world 6. Out of the $16-billion investment, Walmart will invest Walmart in order to acquire Flipkart . This clause will help $2 billion in cash and purchasing shares worth $14 billion from Walmart retain Binny and Flipkart CEO Kalyan Krishnamurthy, existing shareholders of Flipkart. Remaining business of who was a top executive at Tiger Global, to stay with the firm Flipkart will be held by existing shareholders of the company, for a period of at least four years and give them lucrative exit who are founder Binny Bansal, Tencent Holding Ltd, Tiger option, By promising them that it will protect the valuation of Global Management ltd and Microsoft Corp. their shareholding and offer them the potential upside of taking the company public. This is to ensure that Walmart is not As per the terms of the deal co-founder Sachin banal has to quit prematurely left with ownership of company that it does not the company, selling his entire stake of 5.5% in Flipkart . know how to run. Another co-founder Binny Bansal and CEO Kalyan Krishnamurthy will continue to run Flipkart. Other than defining plans of Flipkart’s for IPO, Walmart also detailed other clauses of its shareholding agreement, including Financing of the acquisition the composition of the Flipkart board for the next two years which said Flipkart’s board of directors would initially have In order to finance their acquisition of Flipkart, Walmart has eight members, five of which would be appointed by Walmart sold $16 billion bonds. The company is offering both floating itself, two by certain minority shareholders, and one would and fixed rate bonds in as many as nine parts 7. The lengthiest be Binny Bansal. And of the five directors which Walmart can bond is a 30-year security and yields about 1.05% points above appoint to Flipkart’s board, two must be independent director treasuries. The pressure on the company has been increased due i.e. they must be unaffiliated to the Bentonville, Arkansas -based to this deal. One of the strategy used was to employ the Company. However, the final constitution of the board is yet to borrowed money to augment the potential return of the be determined.

Party % 77% Walmart Soft Bank 22.3% Tiger Bank 22% Nasper 13.8%

Accel Partners 6.9%

E-Bay 6.6% Flipkart Pvt. Ltd. Tencent Holding 6.3% Sachin Bansal 6%

Binny Bansal 5.6% DGT Global 2.7% 23% Tiger Global management, Tencent Microsoft 1.8% Holdings, Accel Partners, Binny Bansal, Employee & 6% Microsoft, Employees and other others

Figure-3: Holding pattern in Flipkart (before and after merger) 18 .

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Walmart’s filing also mentioned that it might appoint new CEO Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, and other chief executives of Flipkart group or replace them Khaitan & Co, Nishith Desai Associates and Trilegal acted as subject certain consulting rights of the founder or board. legal advisors to Flipkart. However, Walmart has so far expressed that it fully supp orts the current management of Flipkart. Reaction of stock market

Another clause that Walmart has put into the agreement is that it Walmart over paid for stake in Flipkart which for about five has the right to invest an additional $3 billion into Flipkart at the times that it paid for jet.com in the year 2016. This news spread same valuation of its initial purchase. If this happens, then like fire on the wall street, where Walmart’s intraday price of Walmart’s shareh olding in Flipkart could go up by a further shares fell to the lowest after the year 2017, wiping off $10 12%-14%, pushing its shareholding beyond 85 per cent 9. billion off its market capitalisation. This is because investors were nervous that Flip kart will not be projected to be profitable Once Walmart owns more than 85% of Flipkart, several rights for some years i.e. it would be generating meaningful losses for of minority shareholders, including Tiger Global, Binny Bansal, the next few years. Microsoft, Tencent and others, w ill be revoked such as their veto right to “prevent certain significant transactions or other Investors were also nervous because the deal is also expected to events involving Flipkart”, their right to refusal and even their negatively impact its EPS by approximately USD 0.25-0.30 in “drag along” rights. the financial year 2019, which comprises the incremental interest expenses associated with investment if the deal closes Walmart also mentioned that it along with Flipkart is in talks by the end of the second quarter of this financial year i.e. with other investors to potentially take part in a funding round. financial year 2019. This impact would be doubled in the Among potential investors in the company is Alphabet, the financial year 202 0. In which Walmart predic ted an EPS parent company of Google , which has been in discussions with reduction of about $ 0.60 per share, comprising of operating both the parties to invest as much as $3 billion into Flipkart. losses of nearly $0.40 to $0.45 per share this amount would Google’s backing w ould give Walmart and Flipkart the tech include 5 percent per share associated to amortisation of backing they require to take on Amazon 10 . intangible assets and depreciation of sho rt lived assets resulting from purchasing accounting which will “last for few years” Advisors to the deal post-closing the deal and the second component is an estimated interest expense of about 15 percent per share 11 . Buy-side (Walmart): i. Financial advisors - JP Morgan Securities LLC is acting as lead advisor along with Barclays. ii. Walmart however has convinced its investors that this dea l Legal advisors- Gibson Dunn & Crucher, Hogan Lovells would give Walmart the fastest possible entry in the most International, Shardul Amarch and Mangaldas & Co. promising and growing Indian e -commerce market and that Flipkart will be benefitted by Walmart’s knowledge of retail Sell-side (Flipkart): i. Financial advisor- Goldman Sachs & co. management and supply chain management, on the other hand LLC acted as exclusive financial advisor to Flipkart. ii. Legal Walmart be benefitted by Flipkart’s “talent, technology, advisor- Allen & Gledhill, Dentons Rodyk & Davidson, customer insights and agile and innovative culture”.

Figure-4: Market price of Walmart share after deal announcement 15 .

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The potential obstacles to deal Why walmart decides to acquire flipkart: i. Walmart first entered India via whole sale model by making partnership with EBay invested around $500 million in Flipkart in 2017, taking a Bharti Enterprises however this partnership failed and ended up 5 percent stake in the business and handing over its eBay India in 2013. ii. Walmart has been in India for over a decade operation in the process. Additionally, eBay also signed what (currently it has 21 best price whole sale stores) and is trying to was then a four-year exclusive commercial arrangement to enter the Indian retail market for more than 15 years however it partner with Flipkart. The agreement was designed to give eBay wasn’t able to grab any share. This is because of the country’s merchants who are outside of India to sell to Flipkart’s Indian FDI rules in multi-brand retail (India allowed 100% FDI in shoppers and similarly allows Flipkart sellers to more easily sell wholesale segment but 51% in multi-brand retail). Now to eBay shoppers present outside of India. The potential obstacle Walmart see’s online as the only method to enter the Indian for Walmart is that the eBay deal still has three years to go and market and for Walmart the best investment option to enter the is alleged to cover all types of merchandise excluding grocery Indian e-commerce segment having about 100 million stuffs Additionally, Flipkart reported a loss of INR 8,771 crore customers is Flipkart 12 . iii. After the US and China , India is ($1.4bn) in Financial year 2017, which may force Walmart to anticipated to be the next big and growing market for online think about a deal. retail (predicted to grow to $200 billion by year 2026) and is the last large, unexplored market globally and this deal will give The potential deal is also facing obstructions due to another Walmart access to India according to analyst firm Morgan retail giant Amazon, who is also enthusiastic to acquire Flipkart Stanley. iv. This move of Walmart is an investment which will (60% stake). The US retailer Amazon has apparently offered a give return to it in future as e-commerce in India is currently breakup fee of $2 billion (breakup fee is a penalty which is set less than 4% of retail market but it is predicted to change as the during the time of making takeover agreement, to be paid if the number of smartphone (and internet) will increase rapidly in the target company cancels the deal). next coming decade. v. Walmart and Amazon are both competitors in US. In US Walmart dominates in brick and As Walmart approached CCI for seeking approval of its mortar stores and Amazon dominates e-commerce segment, by proposed acquisition in Flipkart, two top traders' bodies, acquiring Flipkart, Walmart is bringing this competition to India including the CAIT, have moved the fair-trade regulator (CCI) giving a new front to their fight. Amazon lags behind Flipkart in against the deal as traders across India are afraid that it would terms of GMV. vi. Supply chain arm of Flipkart is the one of the lead to a monopoly of few companies like Walmart due to huge best i.e. e-cart that assists more than 800 cities and also does cash reserves at their disposal. They called the deal a nightmare 50,00,000 deliveries daily. vii. Another reason why Walmart is for domestic retail trade, which would create massive job loss. keen to acquire Flipkart is it owns 40% share in Smart phone market and 60% share in fashion market (together with its units Deal synergies Jabong and Myntra). viii. The third most funded private company is Flipkart which has so far raised more than $7 billion Through the proposed acquisition Flipkart will be able to from some of the well-known investors namely Soft bank, remove its start-up label and will be a part of a worldwide Morgan Stanely, DGT Global and Accel partners among others. enormous Walmart. Through this deal Flipkart will be able to ix. India’s online grocery market is expected to grow in coming increase retail expertise of Walmart and its information of the years due. Currently there are only handful of players in this grocery segment and merchandise supply chain management. market like Grofers and BigBasket. Other retailers have already Additionally, this deal will also provide key enhancement to the started to invest in this segment. Flipkart business in India . The availability of new funds will help Flipkart to expand its operations. Further Flipkart will also get the benefit of Walmart’s direct sourcing from farmers by the Flipkart goes private ahead of walmart deal way of reduced cost. On the other hand, Walmart will be able to Flipkart is currently registered in Singapore as public company take advantage of Flipkart’s existing customers which are but before the deal is finalised it seeks to convert itself to private approximately 54 million and sturdy logistics platform (ekart) company. Hence Flipkart purchased shares worth $350.5 without investing heavily in distribution arms in initial stages. million from some of its investors which includes Tiger global The Market leadership of Flipkartin fashion wear (through and Accel to bring the number of shareholders below 50. This Myntra and Jabong), along with a varied portfolio of cell phones step is taken to make the proposed acquisition by Walmart and appliances will give Walmart with a well-established easier 13 . Through this step Walmart will come on board as market base to sell its own products. Walmart can merge its strategic investor for controlling stake after exit of many existing settlement programs with an application run by Flipkart investors. called PhonePe for effective online purchases and bill payments. Walmart can also capitalise on key drivers such as declining Strategic investors don’t like to deal with the company having data cost, increasing internet penetration, higher disposable large number of shareholders as it becomes too cumbersome, so incomes and big coverage by the organised retail pan India. companies are asked to clean up the capital table or consolidate the small shareholders.

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Profits earned by various stakeholders Accel Partners: Accel Partners is a US based investor, has made investment of over $ 100 million since 2009. Accel will Sachin Bansal: Sachin Bansal will be taking an exit from collect an amount of $ 800 million to $1billion . Flipkart by selling his entire stake of 5.5% making him earn amount of about $ 1 billion. Naspers: South- Africa based Naspers Ltd will be selling its 11% stake and make a profit of about $1.6 billion for Binny Bansal: Binny Bansal will be selling only part of his stake in Flipkart to Walmart bringing him $ 104 million (700 Softbank: Soft bank which had become the largest investor had crore). Remaining stake is 4.24%. earlier had been in discussion to stay invested in Flipkart and delay the sale due to tax implications related to short term Employees: Flipkart Plans to buy shares of worth $500 million capital gains which would arise if the share were sold within 24 from former and existing employees this move will turn months of its purchase. The Vision fund in Jersey does not have employees into crorepatis. a tax treaty with India. Further Soft Bank was also tempted to stay on because o f the expectation that Flipkarts valuation Tiger Global: Tiger global is New York based investment firm would increase, however finally Japans SoftBank decided of has made a total investment of about $ 1 billion since 2010 and selling its 21 percent stake in Flipkart to Walmart expecting to has collected $ 3.3 billion. Its remaining stake in Flipkart is get return of about $ 4 billion which is 1.5 times more than its 5.5%. investment of $2.5 billi on made in Flipkart.

•SoftBank acquires 22% stake in Flipkart for $2.5 billion Aug 2017

•Walmart announces it is acquires 77% in Flipkart for $16 billion, valuing the 11 year old domestic online retailer at about $21 billion May 9,2018

•Within 24 hours of the announcement, SoftBank says its undecided about selling 22% stake, will take 7 -10 days to take call May 10

•SoftBank may settle with Walmart to sell at a predetermined price & time May 11

•SoftBank confirms it is exiting Flipkart, will sell entire stake to Walmart. May 22

Figure -5: Saga of selling softbank stake 19 .

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Tax Implication have been overlooked in valuation of e-commerce segment. E- commerce companies are moving far from these methods and The taxability aspect of the deal depends on how the deal is are valuing their business considering various favourable factors structured. Flipkart India is held by its parent entity Flipkart which push up their valuation such as sales, number of Singapore, which in turn is held by shareholders like Softbank transactions, number of customers, market size, future state of USA and Tiger Global, Mauritius. Major assets or the capital industry, optimistic expected revenue growth. Besides, they also assets of the entire transaction is located in India. seem to overlook certain important factors such as qualified human resource, logistic costs, advertising costs, cancelled/ According to the terms of the deal, the transaction is expected to returned orders, shopping card abandonment rate, discount be a two-step process. The first step will be the Singapore entity offers, etc. selling its stake in the Indian entity to Walmart. This will be done through a direct transfer. One of the factor which is currently being highly used in valuing e-commerce companies is GMV. GMV or gross In the second step, Flipkart Singapore will provide an exit to the revenue in e-commerce terms, means the sale price charged to identified shareholders. This could lead to a buyback or a capital the clients and multiplied by the number of items sold. reduction process by using the money received by it from the sale of share of Flipkart India. For instance, if a company sells 100 articles at Rs 1,000 each, the GMV is Rs. 10,0000. The GMV is after that multiplied by The whole transaction can trigger domestic tax obligations as multiple (x times) to get the valuation of the entity 14 . well as tax treaty issues. This method is highly criticised by brick and mortar retailers. Taxation on Capital Gains: There is a potential capital gains This method is considered to be misleading, unreliable and tax for both non-resident & resident investors under following unstable as it omits the costs of generating revenue and circumstances. considers only the total value of goods and services. GMV also ignores discount, returns/cancellations. Most of the shares sold to Walmart were of non-resident Hence thus could explain why Flipkart continues to increase its shareholders, apart from the resident shareholders. They are valuation even though it is making losses (Flipkart reported a transferring their stakes in Flipkart Singapore that owns an loss of Rs 8771 crore ($1.4 billion in financial year 2017). Indian company to Walmart which is a non-resident US based company. Valuation factors of flipkart

Non-resident Investors: As per the proposed deal Investors of Any company is not only valued by its tangible, i.e. perceptible Flipkart Singapore is expected to sell shares to Walmart. Hence by touch, assets, but also by its intangible assets i.e. Intellectual Section 9(1)(i) will be applicable to them because more than Property. If the market perception of the brand of the company 50% of the value of Flipkart in Singapore is been derived from is more then it will be valued higher than another company with Flipkart in India. lower brand value. As in the case of Flipkart-Walmart deal the IP valuation of Flipkart is so magnificent that Walmart after its According to section 9(1)(i) of the I-T Act, As per Section fight with tooth and nail enters on the largest e-commerce 9(1)(i) of the Income tax Act, any income accruing or arising, market after China, France & USA i.e. India. The IP valuation either directly or indirectly, inter-alia, through the transfer of a of Flipkart can be derived from several aspects such as. capital asset based in India, shall be deemed to accrue or arise in India. Industry: India has an internet user base of 450 million as of now in 2017, about 40% of its population. The industry Thus, such sale of shares would generate capital gains tax under consensus is growing in exceptional way that growth is at an the indirect transfer provision of Income Tax Act. inflection point. In 2015 Flipkart was the largest e-commerce website in India. It shows how Flipkart have been dominant Resident Investors: Sachin Bansal and Binny Bansal who are position in the e-commerce sector and all because of its also proposing to sell their stake would be liable to pay long stupendous Brand. term capital gain tax @ 20% if shares have been held by them for more than 2 years. Market Share: E-commerce giant Flipkart has improved its share for year 2017 in online market of smartphone in relation Reasons of high valuation of flipkart to Amazon, as per the recent report compiled by Counterpoint Research. Flipkart caught a 51 percent share of the online Traditional methods such as discounted cash flow method have smartphone shipments for 2017 while Amazon India grabbed been used across various retail sectors to make valuation of their only 33 percent share. business. While these methods still are in use consistently but

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Investments: Flipkart has till now raised more than $6 billion small retailers. They fear getting squeezed between the two since beginning of 2007. The most recent was a $2.5 billion giants - the Walmart-Flipkart combine and Amazon - even investment by Masayoshi Son -run Softbank Vision Fund in though consumers will be getting the ultimate benefit. August 2017. The last money invested by SoftBank made it one of the largest shareholders, with a 20.7 percent stake, trailed by Collateral Benefits: Investment in e-commerce sector will be Tiger Global at 20.6 percent and Naspers with 12.8 percent. enhanced as and when Walmart pours funds into it . Because of Flipkart's creators, Binny Bansal and Sachin Bansal, hold 5.5 the demonetization where Indian Government pulled back all percent and 5.2 percent stakes.
500 and
1000, the government funding kept declining the Indian e-commerce market space stated drying up. It was Profit: Flipkart has reported a revenue of Rs 15,264 for the year expected that the entry of Walmart will usher fresh fuds and will ending March 2017 according to the documents which are filed help the Indian e-commerce ecosystem recuperate from the duel to ROC. shock because more foreign firms and venture capitalist enters India. New technology: Flipkart is the company which focuses on fulfilling the needs and expectations of customers. It is Job Creation: The potential merger will be enable employment continuously developing its technology to develop high quality generation for both skilled and unskilled labour in the country as customer-focused products. Further it is trying to make it will employ large number of people in logistics, delivery, and shopping experiences convenient and spontaneous for warehousing and other back office operation. customers. Supply Chain and Procurement: The proposed acquisition Outcome of walmart-flipkart deal will bring about massive improvement in supply chain and warehousing, with the focus on cold storage. A significant This millennium deal is an investment for future and is a portion of fruits and vegetable spoils due to inefficient logistics strategy of Walmart of shifting resources into high growth, and Warehouses this deal will bring more investment and potential market. The possible future outcome of the deal is: modern technology which will help in reducing food wastage. The facilities will also support the farmers and small businesses Low Prices, More Variety: Walmart will bring revolution in by procuring inventory directly from them; this will actively Indian retail sector by giving huge variety of consumer goods at increase income for farmers and small businesses. low price. The entry of Walmart in e-commerce market will also provide access to online shoppers to browse through and shop Kirana Stores: Walmart is looking to spread its supply chain from variety of international brands which aren’t yet available arm through partnerships with l kiranas. i.e. Walmart will use in India. existing network and infrastructure of kirana stores to better stock and deliver products. This will help kirana business grow R&D: The key facto r for more prominent market infiltration and also help them modernize their retail practices and get them across the country is efficiency that comes along more Research to use Flipkart Phone pe digital payments network (Point to be &Development. Walmart is recognized for the innovative noted is Ratan Tata is already working on the similar idea with culture and services. This can aid in increasing business of his retail 3.0 model Tathastu ). Walmart grow in India that can make more revenue and generate technical spill overs and knowledge outcome for Impact on Flipkart: Amazon and Flipkart both in a domestic firms too. The enhanced erudite nature of the products competition are burning cash by giving sales offer and discount will create the external demand for the Indian goods i.e. it will during festivals to attract more and more customers. This deal increase opportunities for export. will save Flipkart from incurring losses and running out of cash in its fight with Amazon.

Decrease the IP valuation of other registered brands on Benefits of Deal to Indian Farmers: Commission agent called Flipkart : The merged Walmart-Flipkart company will capture artiyas are the link between Indian farmers and buyers but these 90 % shares of the e-commerce markets in India. And online artiyas are exploiting the farmers by forcing them to sell at a sellers on Flipkart, retailers and even brick-and-mortar traders very distressed price which are fixed by them as they very well are jittery because they fear that Walmart which is known for its know that the crops are perishable. These artiyas provide this ultra-low prices (Everyday low pricing strategy) might kill their black money to politician to fight election. Having knowledge small business they also fear that Walmart might bring its own of this corrupt system being followed by artiyas government private label to Indian consumers and flood the e-commerce created a model reform act, removing the APMC’s but like most platform with its own products via Flipkart which would lead of the government programmes this has also been a flop increase of competitive pressure and make it difficult for online programme. sellers to operate and even survive. The foreign direct investment norms were being violated by this deal and the same Walmart will help Indian farmers to come out of this corrupt has been plead to Competition Commission of India by the system by investing in cold storage, air-conditioned trucks and

International Science Community Association 29 International Research Journal of Social Sciences______ISSN 2319–3565 Vol. 9(2), 21-31, April (2020) Int. Res. J. Social Sci. grading facilities, and connect the farmers directly to food start-ups and get big returns, secondly it communicates to start- processors, this will save post-harvest losses of farmers and also ups that it is right to build enterprise that do not make money. increase their income. Lastly it shows that Profitability and sustainability is not important as long as start-ups creates valuation. Intensify Market Share: As the market share of Flipkart is unanimously growing faster day by day. This deal will capture Conclusion the most of the e-commerce market in the future. M&A’s are considered as significant change agents and are a Steer the market value of Stock: As after the Walmart- critical component of any business strategy. The several reasons Flipkart deals it valuation is over $20 billion. Walmart will open behind companies going for merger and acquisition is to doors for Flipkart to issue IPO by converting it into listed generate synergy values, growth and expansion, achieving subsidiary in future. This will help in giving incentives to economies of scale, access to new market. However, the main employees and also fulfil ambition of management. motive of companies going for mergers and acquisition is to achieve inorganic growth as organic growth through Greenfield Increased Investments: Walmart has already given signals of projects take very long time to be profitable and involve increased investments by companies in the Flipkart. As a part of multiple regulations. the deal Walmart will invest $2 billion in fresh investment in Flipkart. It could also bring “additional potential investors” Mergers and acquisition are also one of the exit strategies used while keeping a majority (Alphabet parent company of google is by investors to cash out their investment and earn profits. An already in talks to invest in Flipkart). The major stake holders of exit occurs when an investor decides to end his involvement Flipkart are getting out of the race as Walmart is expected to with a business by selling his stake in order to earn return on his buy shares from major stakeholders of Flipkart like SoftBank, investment. Tiger global, Infusing Capital and Naspers. M&A comes in various forms investors need to consider the Monopoly: Flipkart currently has an even bigger fight with complex issues involved in M&A and select the most beneficial Amazon in an e-commerce market which Morgan Stanley form by analysing various laws and regulations, costs and estimates will be worth $200 billion by 2026. If it continues to benefits associated with the deals. grow on this rate it will definitely construct monopoly in E- commerce market of India. Further after studying the Walmart-Flipkart deal it can be said that Mergers and acquisitions are influential pointers of a Litigation: As it will create a monopoly over the market and healthy and rising economy. The legal and regulatory context because of its phenomenal Intellectual Property will startle for such corporate restructuring must be easy and not others if they use them and cover damages through litigation. obstructive. The biggest obstacle in completing a merger or “Valuable IP comes from Quality effort.” And, the millennium acquisition is the long process of getting approvals from the deal of Walmart-Flipkart is surely a boost to other organization relevant regulators. to increase their IP value to win and acquire such deals. References Further move by flipkart in competition with amazon: In a bid to compete with Amazons’ Alexa, Flipkart is further in talks 1. Abrar P. (2018). Walmart buys 77% stake in Flipkart. The to acquire Artificial Intelligence Company LIV.AI. LIV.AI has Hindu. Retrieved from https://www.thehindu.com/business/ developed a system that enables voice recognition and can Industry/walmart-buys-major-stake-in-flipkart/article23822890 handle speech in English and nine regional language. The .ece. transaction is in its final stage. Acquisition will add voice to its 2. Damodaran. A. (2018). Walmart should have just let platform. The development will add voice to its platform. Amazon win the Flipkart Battle. The Quint. Retrieved from https://www.thequint.com/news/business/walmart-amazon- Findings flipkart-battle

Walmart has overpaid for Flipkart it could have built the same 3. Damodaran. A. (2018). Walmart’s Flipkart Gambit: Growth business with lesser amount. Rebirth Or Costly Facelift? Retrieved from http:// aswathdamodaran.blogspot.in/2018/05/ walmarts -india- Flipkart’s marketplace model is not consistent with Walmart’s flipkart-gambit-growth.html. online business which sells mostly Walmart’s own products. 4. Das. S (2018). Walmart-Flipkart merger: All you need to know. India Today. Retrieved from https://www. The deal is giving a wrong message to start-ups. While it is indiatoday.in/india/story/walmart-flipkart-merger-all-you- good that this deal is giving good exit value to investors but the need-to-know-1229461-2018-05-09. message given to them shows that investors can invest money in

International Science Community Association 30 International Research Journal of Social Sciences______ISSN 2319–3565 Vol. 9(2), 21-31, April (2020) Int. Res. J. Social Sci.

5. Mukul. P. (2018). How Walmart’s acquisition of Flipkart ani/walmart-flipkart-deal-here-s-ow-india-will-benefit- may impact the Indian e-tail market. Indian Express. 118050901292_1.html. May 9, 2018 Retrieved from https://indianexpress.com/article/explained 12. Biswas Joydeep (2004). Corporate Mergers & Acquisitions /how-walmarts-acquisition-of-flipkart-may-impact-the- in India. Indian Journal of Accounting , XXXV(1), 67-92. indian-e-tail-market-5170569/. 10.05.2018 13. Vanitha, S. (2006). Mergers & Acquisitions in the 6. Peermohamed, A. (2018). Walmart may bring an IPO to Manufacturing sector: An Evaluation Study. Ph.D. make Flipkart public in as little as 4 years. Business Dissertation, Bharathidasan University, Tiruchirappalli. Standard. Retrieved fromhttps://www.business-standard. com/article/companies/walmart-may-bring-an-ipo-to-make- 14. Sarkar, A (2018). Acquisition of Flipkart by Walmart: A flipkart-public-in-as-little-as-4-years-118051300006. Process of Transforming Retail. Economic and Political 13.05.2018 Weekly , 53, 26-27. https://economictimes.indiatimes.com/ small-biz/startups/newsbuzz/walmart-acquires-flipkart-for- 7. Rey, J.R. (2018). Walmart is in advanced talks to acquire 16-bn-worlds-largest-ecommerce-deal/articleshow 640951 Amazon’s India rival Flipkart - but it may have to strike a 45.cms. May 10, 2018. deal with eBay first. Recode. Retrieved from https://www.recode.net/2018/4/13/17231086/walmart- 15. Naveen Bhatia (2017). Startups acquired by flipkart. flipkart-acquisition-ebay-india. 13.04.2018 https://officechai.com/startups/startups-acquired-by-flipkart April 24, 2017 8. Roy P.K. (2018). Why did Walmart buy India's Flipkart? BBC News. Retrieved from https://www.bbc.com/news/ 16. Sumit Chakroborty (2017). Flipkart Story a timeline of world-asia-india-44064337. 11.05.2018 funding from 2007 to 2017. www.financialexpress.com/ industry/technology/the-flipkart-story-a-timeline-of- 9. Singh S. (2018). Walmart-Flipkart Deal: Assessing the Tax funding-from-2007-to-2017. March 20, 2017 Implications. Retrieved from https://www.linkedin .com/pulse/walmart-flipkart-deal-assessing-tax-implications 17. Varsha Bansal (2018). Walmart completes deal to acquire- -srishti-singh. 11.05.2018 77 stake in flipkart to invest usd 2 bn. https://economictimes.indiatimes.com/industry/services/ 10. Verma. S & Dalal. M. (2014). Inside Flipkart’s complex retail/walmart-completes-deal-to-acquire-77-stake-in- structure. Live Mint . Retrieved from https://www. flipkart-to-invest-usd-2-bn/articleshow/65453835.cms . 18 livemint.com/Companies/VXr8oJzNJ4daOYSO5wNETN/I August 2018 . nside-Flipkarts-complex-structure.html. 25.11.2014 18. ET Bureau. (2018). Small Biz › Startups › News Buzz. 11. ANI. (2018). Walmart Flipkart deal here s ow India will https://economictimes.indiatimes.com › May 23, 2018. benefit. https://www.business-standard.com/article/ news-

International Science Community Association 31

Walmart to invest in Flipkart Group, India’s innovative e-commerce company

* Significant opportunity to partner with local leader in a large, fast-growing market * Flipkart’s strong leadership team will be supported by Walmart, Tencent, Tiger Global and Microsoft * Underscores long-term commitment to India, where Walmart looks to serve customers, support job creation, small businesses, farmers and women entrepreneurs * Walmart supports Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future

W almart Inc. (NYSE: WMT) announced it has signed definitive agreements to become the largest shareholder in Flipkart Group (“Flipkart”). The investment will help accelerate Flipkart’s customer-focused mission to transform commerce in India through technology and underscores Walmart’s commitment to sustained job creation and investment in India, one of the largest and fastest-growing economies in the world.

Subject to regulatory approval in India, Walmart will pay approximately $16 billion for an initial stake of approximately 77 percent in Flipkart, formally Flipkart Private Limited. The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart co-founder Binny Bansal, Tencent Holdings Limited, Tiger Global Management LLC and Microsoft Corp. While the immediate focus will be on serving customers and growing the business, Walmart supports Flipkart’s ambition to transition into a publicly-listed, majority-owned subsidiary in the future.

“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of eCommerce in the market,” said Doug McMillon , Walmart’s president and chief executive officer.

“As a company, we are transforming globally to meet and exceed the needs of customers and we look forward to working with Flipkart to grow in this critical market. We are also excited to be doing this with Tencent, Tiger Global and Microsoft, which will be key strategic and technology partners. We are confident this group will provide Flipkart with enhanced strategic and competitive advantage. Our investment will benefit India providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.”

“This investment is of immense importance for India and will help fuel our ambition to deepen our connection with buyers and sellers and to create the next wave of retail in India,” said Binny Bansal , Flipkart’s co-founder and group chief executive officer. “While eCommerce is still a relatively small part of retail in India, we see great potential to grow. Walmart is the ideal partner for the next phase of our journey, and we look forward to working together in the years ahead to bring our strengths and learnings in retail and eCommerce to the fore.”

Founded in 2007, Flipkart has led India’s eCommerce revolution. The company has grown rapidly and earned customer trust, leveraging a powerful technology foundation, including artificial intelligence, and emerging as a leader in electronics, large appliances, mobile and fashion and apparel. In a market where Walmart expects eCommerce to grow at four times the rate of overall retail, and with well-known platforms such as Myntra, Jabong and PhonePe, Flipkart is uniquely positioned to leverage its integrated ecosystem, which is defined by localized service, deep insights into Indian customers and a best-in-class supply chain. Flipkart’s supply chain arm, eKart, serves more than 800 cities, making 500,000 deliveries daily.

In the fiscal year ended March 31, Flipkart recorded GMV of $7.5 billion and net sales of $4.6 billion representing more than 50 percent year-over-year growth in both cases. With the investment, Flipkart will leverage Walmart’s omni-channel retail expertise, grocery and general merchandise supply-chain knowledge and financial strength, while Flipkart’s talent, technology, customer insights and agile and innovative culture will benefit Walmart in India and across the globe.

While Walmart and Flipkart will leverage the combined strengths of both companies, they will maintain distinct brands and operating structures. Currently, Walmart India operates 21 Best Price cash-and-carry stores and one fulfillment center in 19 cities across nine states in India, with more than 95 percent of sourcing coming from India, aiding suppliers, creating skilled jobs and contributing to local economies across the country. Krish Iyer, president and chief executive officer of Walmart India, will continue to lead that part of the business.

“Flipkart has established itself as a prominent player with a strong, entrepreneurial leadership team that is a good cultural fit with Walmart,” said Judith McKenna , president and chief executive officer of Walmart International. “This investment aligns with our strategy and our goal is to contribute to India’s success story, as we grow our business. Over the last 10 years, Flipkart has become a market leader by focusing on customer service, technology, supply chain and a broad assortment of products. With Flipkart and the other shareholders who have come together, we will continue to advance the winning eCommerce ecosystem in India.”

With retail changing rapidly, Walmart is actively looking for new ways to serve customers and moving with speed. The Flipkart investment represents a unique opportunity, consistent with the approach of looking for innovative ways to grow domestically and internationally, particularly in markets with significant long-term opportunity. The Flipkart investment transforms Walmart’s position in a country with more than 1.3 billion people, strong GDP growth, a growing middle class and significant runway for smartphone, internet and eCommerce penetration.

Structure, Financial Implications and Other Details

Walmart’s investment includes $2 billion of new equity funding, which will help Flipkart accelerate growth in the future. Walmart and Flipkart are also in discussions with additional potential investors who may join the round, which could result in Walmart’s investment stake moving lower after the transaction is complete. Even so, the company would retain clear majority ownership. Tencent and Tiger Global will continue on the Flipkart board, joined by new members from Walmart. The final make-up of the board has yet to be determined, but it will also include independent members. The board will work to maintain Flipkart’s core values and entrepreneurial spirit, while ensuring it has strategic and competitive advantages.  Closing is expected later this calendar year, subject to regulatory approval. 

To finance the investment, Walmart intends to use a combination of newly issued debt and cash on hand. Upon closing, Flipkart’s financials will be reported as part of Walmart’s International business segment. If the transaction were to close at the end of the second quarter of this fiscal year, Walmart expects a negative impact to FY19 EPS of approximately $0.25 to $0.30, which includes incremental interest expense related to the investment.

In FY20, as it looks to accelerate growth in this important market, Walmart anticipates an EPS headwind in total of around $0.60 per share, comprised of:

• Operating losses of approximately $0.40 to $0.45 per share, assuming minimal tax benefit for losses in the near to mid-term. This amount includes about $0.05 per share related to amortization of intangible assets and depreciation of short lived assets resulting from purchase accounting, which will only last for a few years post-closing.
• Interest expense of approximately $0.15 per share.

Given the company’s financial strength, Walmart anticipates the continuation of its current share buyback program while maintaining its strong credit profile.

This investment represents a unique opportunity in a market with significant long-term growth prospects. Walmart is investing in a local leader with strong leadership and a culture of innovation and service, and the company is aligned with a strategic and committed shareholder group focused on serving customers. In the mid to long term, as the business scales and efficiencies are realized, Walmart expects losses to decline and returns to improve.

Partnering to Contribute to India

As Walmart scales in India, the company will continue to partner to create sustained economic growth across agriculture, food and retail. Future investments will support national initiatives and will bring sustainable benefits to the country, including:

• Job creation , as plans would create jobs through development of supply chains, commercial opportunity and direct employment.
• Supporting small business and ‘Make in India,’ through direct procurement as well as increased opportunities for exports through global sourcing and eCommerce. Among other initiatives, Walmart will partner with kirana owners and members to help modernize their retail practices and adopt digital payment technologies.
• Support farmers and develop supply chains through local sourcing and improved market access.
• Reduced food waste by improving waste management practices and investing in supply chains, especially cold storage.

For more information, please read the official press release .

For media queries, please click here

Delighted to welcome @Walmart as our long-term partners in @Flipkart . This is the dawn of a new era for India’s #StartUp ecosystem. pic.twitter.com/0dWkgTdPoE — binnybansal (@binnybansal) May 9, 2018

“Our investment will benefit India by providing quality, affordable goods for customers, while creating new skilled jobs and fresh opportunities for small suppliers, farmers and women entrepreneurs.” – Doug McMillon, CEO Walmart. pic.twitter.com/8izGoP3nYX — Walmart Inc. (@WalmartInc) May 9, 2018

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Walmart-Flipkart Acquisition: a case study

• Ritu Wadhwa

Author Affiliations

• 1 Amity Business School, Amity University, India

Int. Res. J. Social Sci., Volume 9, Issue (2), Pages 21-31, April,14 (2020)

There are various reasons of increasing M&A however, most acquisitions and mergers are done to reduce competition. Year 2017 was the booming year for mergers and acquisition activity specially in e-commerce sector as this sector saw M&A worth $2,112 million according to report of Grant Thornton. Further, India has a potential to nurture more than fourfold to approx. $150 billion by the year 2022, affected by increasing income and heave in the internet users, as per the latest reports. Amongst all e-tailing segment is the fastest growing. Making the biggest acquisition in e-tailing sector this report puts light on the Most recent case of American retail giant which has acquired Flipkart in a competition with Amazon. Furthermore, it divulges the viewpoint behind the huge acquisition and how this will contribute to the Indian economy progression. The strategy behind Walmart-Flipkart alliance is more than just taking on Amazon. For Walmart this alliance will make its entry into retail in India which was long awaited through e-commerce route by holding Flipkart′s hand. Following this acquisition, the industry has come under the lenses of lawmakers and regulators and the new draft e-commerce policy has been formulated which mentions stern regulations on online retail, including curbs on discounts, which has caused an uproar in the industry.

• Abrar P. (2018)., Walmart buys 77% stake in Flipkart., The Hindu. Retrieved from https://www.thehindu.com/business/ Industry/walmart-buys-major-stake-in-flipkart/article23822890 .ece. Google Scholar
• Damodaran. A. (2018)., Walmart should have just let Amazon win the Flipkart Battle., The Quint. Retrieved from https://www.thequint.com/news/business/walmart-amazon-flipkart-battle Google Scholar
• Damodaran. A. (2018)., Walmart′s Flipkart Gambit: Growth Rebirth Or Costly Facelift?, Retrieved from http:// aswathdamodaran.blogspot.in/2018/05/walmarts-india-flipkart-gambit-growth.html. Google Scholar
• Das. S (2018)., Walmart-Flipkart merger: All you need to know., India Today. Retrieved from https://www. indiatoday.in/india/story/walmart-flipkart-merger-all-you-need-to-know-1229461-2018-05-09. Google Scholar
• Mukul. P. (2018)., How Walmart′s acquisition of Flipkart may impact the Indian e-tail market. Indian Express., Retrieved from https://indianexpress.com/article/explained /how-walmarts-acquisition-of-flipkart-may-impact-the-indian-e-tail-market-5170569/. 10.05.2018 Google Scholar
• Peermohamed, A. (2018)., Walmart may bring an IPO to make Flipkart public in as little as 4 years., Business Standard. Retrieved fromhttps://www.business-standard. com/article/companies/walmart-may-bring-an-ipo-to-make-flipkart-public-in-as-little-as-4-years-118051300006. 13.05.2018 Google Scholar
• Rey, J.R. (2018)., Walmart is in advanced talks to acquire Amazon′s India rival Flipkart - but it may have to strike a deal with eBay first., Recode. Retrieved from https://www.recode.net/2018/4/13/17231086/walmart-flipkart-acquisition-ebay-india. 13.04.2018 Google Scholar
• Roy P.K. (2018)., Why did Walmart buy India, BBC News. Retrieved from https://www.bbc.com/news/ world-asia-india-44064337. 11.05.2018 Google Scholar
• Singh S. (2018)., Walmart-Flipkart Deal: Assessing the Tax Implications., Retrieved from https://www.linkedin .com/pulse/walmart-flipkart-deal-assessing-tax-implications -srishti-singh. 11.05.2018 Google Scholar
• Verma. S & Dalal. M. (2014)., Inside Flipkart′s complex structure., Live Mint. Retrieved from https://www. livemint.com/Companies/VXr8oJzNJ4daOYSO5wNETN/Inside-Flipkarts-complex-structure.html. 25.11.2014
• ANI. (2018)., Walmart Flipkart deal here s ow India will benefit., https://www.business-standard.com/article/ news-ani/walmart-flipkart-deal-here-s-ow-india-will-benefit-118050901292_1.html. May 9, 2018 Google Scholar
• Biswas Joydeep (2004)., Corporate Mergers & Acquisitions in India., Indian Journal of Accounting, XXXV(1), 67-92. Google Scholar
• Vanitha, S. (2006)., Mergers & Acquisitions in the Manufacturing sector: An Evaluation Study., Ph.D. Dissertation, Bharathidasan University, Tiruchirappalli.
• Sarkar, A (2018)., Acquisition of Flipkart by Walmart: A Process of Transforming Retail., Economic and Political Weekly, 53, 26-27. https://economictimes.indiatimes.com/ small-biz/startups/newsbuzz/walmart-acquires-flipkart-for-16-bn-worlds-largest-ecommerce-deal/articleshow 640951 45.cms. May 10, 2018. Google Scholar
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• Varsha Bansal (2018)., Walmart completes deal to acquire-77 stake in flipkart to invest usd 2 bn., https://economictimes.indiatimes.com/industry/services/ retail/walmart-completes-deal-to-acquire-77-stake-in-flipkart-to-invest-usd-2-bn/articleshow/65453835.cms. 18 August 2018. Google Scholar
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©2024 International Science Community Association

A Detailed Case Study on Largest Retail Giant Walmart

Avinash kumar mahato

Walmart is one of the largest retail companies in the world. It was founded in 1962 by Sam Walton. The headquarter of this company is situated in the United States. The main aim of the company is to provide consistent discounts, loyal customer service, and fast friendly service.

Walmart’s targets to expand its business in large cities as well as spread retail stores throughout the world. The retail stores of Walmart are divided into four divisions Walmart Supercenters , Discount Stores, Neighborhood Markets, and Sam’s Clubs warehouses. More than 100 million customers are visiting these Walmart Stores.

It is very uncomfortable for small merchants and communities in America. Walmart reaches their town and provides low-cost offers and the best customer service. It is a very bad condition for small merchants and businessmen in America. To downtown merchants, Walmart just comes and takes over all the small stores.

The purchasing power, aggressive marketing and provide low prices to the customer by Walmart, tend to pull out the business by the small merchants. Gradually the dream of Walmart company to become the largest retailer in the world is full filing day-by-day. But, they increase their business by the wrong actions and do not respect the culture or language of the communities.

Timeline Events Of Walmart company Business Model Of Walmart How Walmart Generates Revenue? Walmart’s Marketing Strategy Walmart’s - Flipkart Acquisition

Timeline Events Of Walmart company

The Timeline of events for Walmart company since its inception.

• 1960: Sam Walton opened his first discount store in Rogers, Arkansas.
• 1981: Walmart become the largest company in America .
• 1981: After becoming the largest company in America, they opened their stores in a small Louisiana town.
• 1983: Walmart opened its stores in Pawhuska and Oklahoma.
• 1986: Walmart claims that it can restore more than 4000 jobs to American Communities.
• 1989: They drive a campaign about Environmental awareness that Walmart is aware of land, water, and air.
• 1990: There are some activist groups against the expansion of Walmart’s store.
• 31st December 1990: Walmart’s closed its stores in  Louisiana.
• 5th November 1991: Walmart opened up its store in Lowa City.
• 6th October 1998: Walmart’s founder Sam Walton created a family charity named Walton Family Charitable Support Foundation.
• June 1999: Walmart takes over the ASDA Chain (a British supermarket chain), now they have stores and depots across the United States.
• 2001: Walmart becomes the world’s largest retailer, got huge sales of $191 billion.
• July 2003: Walmart opened its stores in Beijing and till now they have 22 stores in China and counting.
• 2006: Walmart closed its stores in Germany.
• July 2007: Walmart is operating more than 2500 retail units in Walmart International and more than 500,000 employers in some countries.
• 2007: By the ending of this year, they got a net $45 billion sales.
• 2008: Walmart’s opened its wholesale facility in India. This is the first step of Walmart's to sell products through its retail outlets in India.
• 2018: Walmart acquired Flipkart for $16 billion and owned 77% stake in India’s largest online retailer brand.

Business Model Of Walmart

There are different business models that are followed by successful companies which vary from time to time. The business model of Walmart is based to eliminate the middleman from the distribution channels. The advantage of removing the middleman is to provide benefit to the consumer by providing products at lower costs. The main motive of Walmart's business strategy company is to enter every segment of the market and dominate the market by providing products at a lower price.

The main marketing strategy of the company is based on leading on price, be competitive, and deliver a great experience by the motto of Everyday Lower price.

Walmart has three important segments.

Walmart U.S

Walmart U.S is operated in the U.S. They provide customers with products and services that are not present physically in stores. They provide their services via the website and mobile application . The website of Walmart company has a special feature that provides a third party to sell products. The company operates its business on various platforms like supermarkets, discount stores, neighborhood markets, and e-commerce websites .

Walmart International

Walmart International is also divided into three sections which are retailers, wholesalers, and other small projects. These sections are also divided into various sections such as supermarkets, warehouses, electronics, apparel stores , drug stores, digital retailers, and many more.

It is the online platform of Walmart’s company i.e., “ samsclub.com ”. This club is consists of memberships of the only warehouse retailer operations. This section includes warehouse clubs in the U.S, as well as samsclub.com.

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How Walmart Generates Revenue?

The Revenue Model of Walmart deals with the principle of buying in bulk in one go. In this system, they got a huge discount from the manufacturers. They sell in small quantities at low prices. By reducing the price they have high sales volume through which they have high earning.

Walmart’s generate its revenue by removing the middleman and selling their product directly to the customers and services to business. The two main sources of revenue are Product revenue and Service revenue .

Walmart's revenue in the fiscal year ending January, 2020 was $524 Billion.

Product Revenue

Walmart has a wide range of products in various categories:-

• In the grocery category, they have products like Daily needs products, dairy products, frozen foods, bakery, baby products, beauty aids, and many more.
• Health and wellness category have products like Pharmacy products and clinical services .
• The entertainment category has products like electronics products, toys, cameras, movies, music, videos, and books.
• Stationary, paints, and hardware, Automotive, sporting goods, crafts, and seasonal merchandise.
• Apparel categories include apparel for men, women, boys, girls, shoes, jewelry, and accessories.
• Home appliances include home furnishing services, home decor, livings, and horticulture.

Service Revenue

Walmart also provide services to generate revenue in various fields:-

• They provide financial services like prepaid cards , money orders, wire transfer, money transfers, bill payments, and so on.
• VUDU movie streaming services: This is a subscription-based OTT platform for buying and renting movies, watching TV shows on demand.
• Clinical Services include primary health care, Physical and Wellness checks, Clinical lab tests.
• Health Insurance services

Walmart’s Marketing Strategy

Walmart's Business Strategy Analysis is one of the most important parts of any business whether it is small or large. It is very important to make an effective marketing plan to survive in the market . Walmart uses the principle of business marketing penetration method which is used to capture the market by offering lower prices and competitive prices to the consumers.

The company follows cost leadership which makes a huge profit for the company. The company provide low prices to the consumer and treated all the customers as king of the market to maintain the relationship between Walmart and the customer.

According to Walmart, there are four factors that drive the customer’s choice of retailer:

• Assortment.

One more reason for the success of Walmart is purchasing products from local manufacturers in a bulk in one go and selling in small quantities. Buying from local manufacturers is the benefit for both. Buying more products from local manufacturers means they are creating more jobs and they reduce the unemployment rate. They should provide good quality products at a lower price to maintain a good relationship with customers and continue to get profits in business.

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Walmart’s - Flipkart Acquisition

Flipkart is one of the leading Indian e-commerce brands. In 2018, Walmart takes 77% stakes in India’s largest e-commerce company Flipkart and makes the world’s biggest purchase of an e-commerce company.

After this acquisition the future of eCommerce industry in India has become more competitive than ever.

The three main reasons for the acquisition of Flipkart are Flipkart’s leadership in some lucrative sections, its payment platform and the company’s talent pool.

Walmart’s world’s largest company is to continue to expand its business by improving its strategies day-by-day. The main reason for the success of Walmart is the EDLP system i.e., Everyday Low Price. They are working aggressively to maintain profits, market shares, and provide low prices to consumers. There are many business ideas to gain profit from a market. All depends on how you play the cards for a profitable business.

Walmart has made acquisitions of 28 organizations and has 16 sub-organization.

Feel free to reach us and share your understanding and views on the case study of Walmart. We would love to hear from you.

What is the business model of Walmart?

The business model of Walmart is based on eliminating the middleman from the distribution channels. The advantage of removing the middleman is to provide benefit to the consumer by providing products at lower costs.

What is the motive behind Walmart's Business Strategy?

The main motive of the Walmart business strategy company is to enter every segment of the market and dominate the market by providing products at a lower price.

What is Walmart's Market Strategy?

How does walmart generate revenue.

The earning model of Walmart deals with the principle of buying in bulk in one go. In this system, they got a huge discount from the manufacturers. Walmart’s generate its revenue by removing the middleman and selling their product directly to the customers and services to business.

What are the main sources of revenue for Walmart?

The two main sources of revenue are:

• Product revenue
• Service revenue

Is Walmart owned by China?

The Walmart branch in China is majority Chinese-owned. But predominantly it is owned by Sam Walton's many children.

Why is Walmart so cheap?

They sell in small quantities at low prices. By reducing the price they have high sales volume through which they have high earning.  Hence, by selling in high volume they can sell it at a cheap price and still gain profit.

What are the sub-organisations under Walmart?

There are 16 sub-organisations of Walmart. Some of them are:

• Walmart Labs
• Seiyu Group
• Walmart Canada

What are the top acquisitions of Walmart?

Walmart has acquired 28 companies. Some top acquisitions are:

Must have tools for startups - Recommended by StartupTalky

• Convert Visitors into Leads- SeizeLead
• Payment Gateway- Razorpay
• Spy on your Competitors- Adspyder
• Manage your business smoothly- Google Workspace

Conquer Clutter: Organisation Solutions for a Productive Workspace

Productivity suffers in a cluttered, unorganized work environment. When people can't find what they're looking for, they waste time sifting through many papers and miscellaneous items across their desks. The disorganized working environment might also stress them out and make concentrating difficult. Fortunately, investing in some office organization solutions can

Top 10 Multiplex Movie Theater Chains in India

Whether it’s a small town or a metropolitan city, the trend and popularity of multiplexes charm every soul! Multiplexes usually refer to the theatre that displays multiple screens at the same time, which means multiple movies simultaneously. The multiplexes and theatre companies in India have changed the preferences and

24 Ways To Make Money Online in 2024

Online work is counted as one of the easiest and the most efficient ways to make money provided that you are equipped with the required skills and pledge to update yourself with each passing moment. Working online received a new boost with the recent wave of digitization that proved to

List of Top 17 Instant Loan Apps in India [2024]

At many points in our lives, we require loans to meet our needs. As per a CIC report published in June 2021, around half of India's working population has taken loans in some form. Among all types, a personal loan is quite convenient as it can be taken without any