Seven months after the Walmart acquisition, it seems that the ‘End of Reason’ has set in at Flipkart as senior leadership exits, layoffs and reshuffles abound. Is Walmart messing up on its largest e-commerce catch already?
It took Walmart over 20 months of intense negotiations to consummate the US$ 16 billion acquisition of 77% stake in Flipkart in May 2018 — largest acquisition for India and also the world’s largest deal in the e-commerce space.
The typical analyst called the acquisition overvalued for a still loss-making Flipkart, with the company’s existing investors Tiger Global, SoftBank Vision Fund and Accell being the only entities really benefitting and Indian founders and investors getting just around 10%.
But for Walmart, the driving factor was the anticipated boom in the Indian e-commerce space — expected to grow from US$ 38 billion in 2017 to US$ 200 billion by 2026. Time was running out for Walmart to make its play in Indian e-commerce, and this was perhaps the fastest way to get its foot in the door.
But just over seven months since the deal was announced, Walmart clearly has its foot somewhere else! Instead of disrupting the market, Flipkart is witnessing a domino effect in its own bastion instead, with a series of exits and reshuffles across the board shaking its foundations. Mayhem and confusion are clearly the order of the day.
It all started with the exit of Co-founder and Group CEO Binny Bansal (Sachin Bansal exited immediately after the Walmart deal) under controversial circumstances for ‘personal misconduct’ on November 13.
Walmart’s statement on the exit gave out little in words and left plenty for imagination. It was apparently a sexual assault allegation against him, for which Walmart’s investigation found no evidence, but revealed “other lapses in judgment, particularly a lack of transparency, related to how Binny responded to the situation”. It also said Binny had been “contemplating a transition for some time”. By default or by design, both visionaries were now gone, and it was Captain Walmart at the steering wheel.
The ship has been unsteady ever since the Walmart way took over. The first blow came almost immediately after Bansal’s resignation on November 14, with Walmart announcing that it would put Myntra and Jabong under Flipkart.
Flipkart acquired Myntra
Myntra was acquired by Flipkart in 2014, and it then brought Jabong under its umbrella in 2016. Myntra (along with Jabong) has an annual GMV of US$ 2 billion and leads the online fashion space. With these two companies, Flipkart dominates online fashion sales with a share of 60–70%. Myntra and Jabong were earlier functioning as independent entities, but Walmart seems to be in favour of getting them into the Flipkart fold.
Myntra CEO Ananth Narayan was supposed to report to new Flipkart CEO Kalyan Krishnamurthy. Soon enough, reports started emerging of Narayan planning to quit, as he was apparently close to Binny Bansal and had serious professional disagreements with Krishnamurthy.
More prominently, Krishnamurthy supposedly held the Walmart view that Myntra and Jabong should be integrated with Flipkart Fashion and Narayan wanted to keep them separate. It is anyone’s guess as to whose view would have prevailed.
After a string of speculations and a denial on November 16 with respect to his exit plans, Myntra CEO Ananth Narayan has finally resigned. He is expected to officially leave after the End of Reason Sale in January. Other senior leaders have also taken the exit door if the grapevine is to be believed, including Chief Revenue Officer Mithun Sundar, who had joined in April and HR head Manpreet Ratia, who was also responsible for operations, supply chain and customer experience. This is in addition to the resignations of key leaders including former strategy head Ananya Tripathi and former Jabong head Gunjan Soni. Manohar Kamath, another top leader from Myntra has been moved to the fashion unit of Flipkart. Myntra CTO Jeyandran Venugopal is also expected to move to Flipkart.
Across Flipkart and Jabong, some 150–200 people have already been laid off and more are expected to be asked to leave as the integration takes effect. Meanwhile, Flipkart is also trying to control the mayhem by offering retention bonuses and packages to around 50–75 key executives and employees at Myntra.
But notably, these are not being offered at the senior vice president level. This can only point to one conclusion, Myntra and Jabong may soon be history in the Walmart era as they get under the Flipkart fold. Therefore, there is considerable redundancy in leadership positions, and Walmart does not seem to mind letting go of some of the top talent.
Right from the rather incoherent explanation of Binny Bansal’s exit, Walmart seems to be groping in the dark on how to manage the most critical factor for successful integration of a company — people. Moreover, communication is the key to successful transition after an acquisition, but Walmart has just about managed to tick all the wrong boxes on this front too.
As a consequence, with the spate of layoffs, senior management exits, selective retention packages and the hurried reshuffles that are making the headlines, Flipkart’s environment only reeks of turmoil and confusion at present. Something is definitely not right under the hood.
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