Walmart calls first year of Flipkart deal a success; deal still weighs on income

by Kim Souza (ksouza@talkbusiness.net) 441 views 

It’s been one year since Walmart completed its $16 billion acquisition of Flipkart – a bold investment in Indian retail. The deal gave Walmart a 77% stake in Flipkart, with the retail giant retaining partners Tencent, Tiger Global, Microsoft and company co-founder Binny Bansal, who maintains a 3.52% stake in the company.

Walmart International CEO Judith McKenna said Monday (Aug 19) Walmart has accomplished a lot with Flipkart in the inaugural year. McKenna said Flipkart already had a customer-centric business inside India before Walmart came on board. She said that was one of the things that attracted Walmart to the deal.

“I continue to be inspired by the passion, entrepreneurial spirit and creativity they [Flipkart] bring to solving everyday problems for our customers in one of the most diverse and dynamic countries in the world,” McKenna noted in a blog post on Monday.

In the post, McKenna highlighted some of the successes Flipkart and Walmart have experienced over the past year. She said Flipkart made formal credit and retail more inclusive by launching a co-branded credit card, which is already receiving positive feedback from customers.

“The team has also placed an emphasis on bringing small business owners onto the Flipkart platform through the Flipkart Samarth program – empowering artisans in communities big and small with unprecedented access to more than 150 million Flipkart shoppers,” McKenna noted.

McKenna has said the ecosystem Flipkart is creating around the business is something Walmart was also attracted to because building a comparable ecosystem around Walmart is big priority of company CEO Doug McMillon. One of the biggest successes in the Flipkart ecosystem is Myntra, its fashion business. McKenna said earlier this year Flipkart teamed up with Walmart Canada to launch the fashion platform Myntra on Walmart Canada’s website.

“This is a great example of how we can work together to make shopping for the latest Indian apparel easier and more accessible for our customers in Canada,” McKenna noted.

She said from Flipkart’s inception the company has built a culture of innovating with speed through the entire business, which was also something Walmart admired and continues to emulate in its own organization. Another success inside the Flipkart business is PhonePe, a digital payment platform launched in 2016. McKenna said PhonePe has surpassed 2 billion transactions in less than three years. She said Walmart recently added PhonePe services to Walmart India’s B2B Cash & Carry stores.

This digital payment system helps give small business owners added convenience and its another way Walmart and Flipkart are connecting the dots across their businesses, McKenna noted. With more than one million Best Price members, mainly kiranas, (neighborhood stores) now being introduced to PhonePe’s digital payments, the company is accelerating its push to drive offline transaction traffic as the next step for the adoption of digital payments in India, Walmart said.

The retailer said PhonePe recently surpassed one million offline merchants on its platform following partnerships with major retail chains across India. Small merchants are loving the convenience of digital payments, the company added.

“PhonePe is an added benefit as I can pay directly and instantly at a Best Price store now. It is a secured payment method and I will not have to stand in queues in the bank. I can therefore spend more time at my store and take care of my customers,” according to Mohammad Khader Hussain, owner of “Famous Chemist and Druggist,” a kirana member of Walmart India’s Best Price Store in Hyderabad. Hussain’s comments were noted in the Walmart release.

McKenna said her favorite story to share about Flipkart involves Flipkart delivery experts known as “Wishmasters.” This is a logistics business which also enticed Walmart to invest in Flipkart. Flipkart employs 26,811 Wishmasters, who deliver 890,000 packages a day. Many of the Wishmasters have disabilities such as deafness.

“At Flipkart, every order is treated as a customer’s wish. And not only are they doing a brilliant job of granting customers’ wishes, but they’re doing something truly special to create a more inclusive team,” McKenna explained.

In India, people with disabilities must rely on government assistance for income. Flipkart is changing that by hiring and training them to deliver packages as Wishmasters where they can earn a sustainable income. McKenna said the program instills pride and independence they didn’t have before.

While the Flipkart deal is deemed a success on many levels, the investment is still weighing on Walmart’s financials. Last year the investment cost investors roughly 25 cents a share in net income. Losses this year are expected to be around 60 cents per share. McMillon said it was a gamble the retail giant had to make given India’s e-commerce market is expected to grow from $27 billion to $73 billion by 2022.

“In the case of India, it’s worth it. If it had been a smaller market, we may have passed. But this is a unique opportunity. And when you look out 5, 10, 20 years from now, time will tell,” McMillon said last year.

Charles O’Shea, an analyst with Moody’s, has said the Flipkart deal would create significant losses for the next few years at Walmart. He termed the deal an investment for the future given the growth opportunities in India.

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