Google’s parent Alphabet is reportedly in talks with the US-based retail behemoth, Walmart to acquire a minority stake in India’s largest e-tailer, Flipkart, as per reports.
The tech giant is likely to invest $1-2 billion after the Walmart acquisition takes place, which is to be announced soon.
Alphabet and Walmart already have a partnership in the US since last year. In the US, Walmart products are sold on Google Express, its online shopping mall. Google also sells Walmart products through Google Assistant, its voice-controlled speaker which competes with Amazon’s Echo on Google Home. Walmart customers have the option of linking their accounts to Google.
What is the significance of this partnership?
The coming together of world’s two biggest corporations is being viewed as an attempt to challenge Amazon’s booming retail business across the world. The partnership is also meant to leap into the voice-based shopping experience in future.
Google Assistant, the AI-enabled software found in Android smartphones is expected to enhance the shopping experience for Walmart customers. Moreover, the technology giant will also be able to recommend items based on past orders.
About the Flipkart-Walmart deal
Walmart is gearing up to buy a controlling stake in Flipkart, the Indian e-commerce market leader. The deal, which is on its last leg, is likely to be finalised by the end of this month.
Sources close to the development have said that SoftBank, the biggest stakeholder in Flipkart, was reluctant to part with its 23.6% stake for $12 Bn. It had estimated a better price that amounted to $15-17 billion, through a secondary sale of shares.
However, the Japanese conglomerate seems to have come around and has solved the deal with Walmart.
Reuters had reported last week that Bentonville, Arkansas-based retail giant, Walmart has completed its due diligence on Flipkart and had made a proposal to buy 51 percent or more of the Indian company for between $10 billion to $12 billion.
Walmart has also reached an agreement on buying stakes of New York-based investment firm Tiger Global Management, South African media conglomerate Naspers, venture capital firm Accel and China’s Tencent Holdings.
How will the deal benefit the major stakeholders?
Striking a deal with Flipkart would enable Walmart to establish itself in India’s $670 billion retail markets.
Walmart is the world’s largest traditional retailer, but Amazon has proved a stiff competition as consumers increasingly migrate to online retail. India is the next big potential prize after the US and China. Foreign investors have not made much progress against the Alibaba Group Holding Ltd. in the country. The market here is not that cutthroat and Walmart has several new strategies up its sleeves to woo customers in India.
Flipkart also stands to gain from the over $3 trillion Walmart’s retail experience of more than 50 years in the US.
If this deal gets finalised, Flipkart will have an investor who understands retail and has done it at scale.
It will also help strengthen Flipkart’s supply chain and enhance efficiency in procurement, product assortment and retailing. Flipkart has been intending to open retail stores in India for a long time now but has been waiting for the right investment partner. Walmart would be the right partner for Flipkart in this venture.
Also Read: The Flipkart-Walmart Deal Might Get Finalised By Next Week
