In this winner-wins—it-all battle that is set to determine the key holder of the cards held up in a three-way fight between Reliance, Amazon and Flipkart owner Walmart to gain dominance over the Indian consumers, all eyes are on who takes away the big prize. Will Flipkart’s strategy of growing rapidly in the grocery market give it the winning edge while the top two contenders remain horns locked in a long-standing court battle?
- Amazon Boss Jeff Bezos faces a race against time to pull a stop on Ambani’s $3.4 billion plan to buy up local rival Future Group’s 1,500 fashion and grocery stores.
- India’s retail market is expected to grow 46 per cent over the span of the next four years to a yearly $1.3 trillion, according to research.
- Flipkart jumped on the grocery bandwagon and onboarded 70,000 small stores last year, flush with a $1.2 billion fund investment.
- Is Walmart-owned Flipkart the next king of online grocery stores in India?
A fierce battle between two of the world’s richest and powerful men seems to be dominating the limelight currently. But this isn’t a two-way fight between Amazon and Reliance. Possibly, there is even a third player – the Walmart–Flipkart combination that does deserve closer attention. So, what is the silent impact of this fight on the Doug McMillon-led global giant?
In fact, the Walmart-Flipkart combination, led by global CEO Doug McMillon did go on to acquire minority stakes of 7.8 per cent (₹1,500 Crores) in Aditya Birla Fashion Retail early this year. Also, the company invested ₹269 Crores in Arvind Youth Brands (that owns the Flying Machine brand) last year in quick succession. Does this mean that one of India’s biggest e-commerce giants, Flipkart is prepping up its retail game?
In addition, what is the role of the oldest formats of retail in India, Kirana stores, now? Flipkart clearly believes that Kiranas have a high level of effective management of supply chain drivers like inventory, information, sourcing, and documentation, facilities, maximum reach to consumers, and not to mention the long-standing relationship with the customers. But, before we delve any deeper into this connection and understand what the big battle means to Flipkart in India, let us take a quick look at the ongoing battle, first.
The Epic e-Commerce Court Battle
Reliance Industries Chairman, Mukesh Ambani and the world’s richest man, CEO of Amazon, Jeff Bezos have both locked horns in a court battle. Importantly, over the ownership of the ₹26,000 Crores debt-encumbered Future Group. But, at the core of the fight is the battle for the ultimate power in the $850 billion (₹62.8 Lakh Crores) Indian retail space. After Alibaba pushed Amazon to a corner not only in China but also in South East Asia, Amazon eyes the Indian retail industry as its last resort open to help the giant achieve scaling outside of the United States of America.
Watch: Why Jeff Bezos and Mukesh Ambani are at War
However, Jeff Bezos is facing a race against time to pull a stop on Reliance Industries’ $3.4 billion (₹340 Crores) plan to buy up local rival Future Group’s 1,500 fashion and grocery stores. While Ambani aims to reshape India for years to come via JioMart’s massive expansion drive that delivers daily essentials to millions through a huge network of mom-and-pop shops, it looks like Amazon boss is trying to do whatever it takes to guarantee that he does not miss his only chance to buy India’s second-biggest retailer, without a fight. In February, Amazon managed to buy some court time after the Supreme Court of India barred Ambani from acquiring the languishing Future Group.
Amazon’s Strategy to Trade Blows with Reliance Industries
To put it simply, it looks like Amazon has never been in such a trade-off like this one with a rival like the local hero Reliance Industries in any other market. So, the world’s biggest e-commerce company is now busy on a huge expansion drive in India. Possibly, this could be making the country’s retail battle actually quite tougher than it already has been for its rivals like Mukesh Ambani-owned Reliance Industries and Flipkart. But, this expansion drive looks like Bezos’ way of ensuring that Amazons’ online retail businesses do not get impacted in case the ongoing court battle with the Future Group turns out to be a lost cause.
India’s Grocery Market, the New Empire?
The ongoing digital transformation of the Kirana stores in the country will matter for everyone.
From Procter & Gamble Company to Unilever NV to even State Bank of India, the country’s biggest lender. It will also impact Amazon.com Inc boss Jeff Bezos and Reliance Industries owner Mukesh Ambani. According to Forrester Research, India’s retail market is expected to grow 46 percent over the span of the next four years to a yearly $1.3 trillion. It clearly indicates that the key battle is to be fought over groceries. Also, groceries will grow to be worth around an annual $740 billion by 2024. So, what does this mean for the third biggest rival – Walmart-owned Flipkart? Even, Flipkart jumped on the grocery bandwagon and onboarded 70,000 small stores last year flush with a $1.2 billion fund investment.
The e-commerce company even said that there was a 30 per cent rise in sellers in 2020 amid the pandemic. This was mainly due to the small and medium businesses from tier-II and tier-III towns. It is worth remembering that the world’s biggest retailer Walmart had invested $16 billion to buy the e-commerce company Flipkart and how recently the association also announced an additional investment of $2 billion (₹14,478 Crores). Soon, Flipkart did propose to supply goods to Kiranas.
Precisely, aiming to leverage the expertise of Walmart India, cash and carry business popular for its servicing Kiranas for over a decade now. Also, Walmart India runs 28 best price shops catering to over 1.5 million consumers MSMEs and Kiranas. Walmart India house in Flipkart Wholesale launched its marketplace operations last August beginning with services for the grocery and the fashion spaces. This initiative was clearly aimed at being able to hold on to the existing customers of Walmart India and not losing them out to Jio and Amazon.
While Reliance Retail is placing its bet on its tie-up with messenger service WhatsApp to give it the winning edge, Amazon is aiming to tie up with small Kiranas to sell their products on their online marketplaces. For instance, five years back, Amazon in a pilot project tied up with modern retailers such as Big Bazaar in Bengaluru to deliver groceries.
Eyes on the Big Prize
What remains to be seen now is how Walmart-Flipkart backed up with huge experience, technology, geographical spread, and capital is impacted by the big players in India. Also, let us not forget the fourth wheel, one of India’s oldest, biggest, and most trusted business houses, the Tata Group that is bidding for India’s biggest online grocer Big Basket.
Watch: Walmart-Flipkart: Valuation, Strategy, Competitive Edge
In fact, the deal proposes to buy over $1 billion acquiring 64.3 per cent shares in Supermarket Grocery Supplies. Also, currently, Indian laws restrict foreign companies from operating online multi-brand retail stores. Legal experts have time and again implied that Amazon may have planned Future Coupons investment to workaround FDI rules. Does it mean Amazon was already sailing quite close to the wind?