With healthy competition and no fear of monopolies emerging, consumers' only stand to gain. The three players would help in building a strong supply chain and logistics which would ensure quicker delivery mechanism.
With Walmart’s acquisition of Flipkart, the contours of the domestic e-commerce business have changed in the sense that now three large players will fight it out in the market with consumers benefiting in the process, experts said. With Walmart’s muscle coming into Flipkart, it will be able to take on rival Amazon more effectively and the third player is China’s Alibaba, which has about 53.4% stake in Paytm Mall. “The nature of investment in e-commerce has changed as none of these players are short-term financial investors; instead it has now turned into a long-term play with focus on profitability. From Walmart to Alibaba and even Amazon have come to India with an aim to build a long-term profitable business,” said Srini Vudayagiri, managing partner, Peepul Capital.
Rahul Chowdhri, partner at Stellaris Venture Partners, said that Walmart’s entry also means that no single player would have a monopoly in the market. “If earlier there was a fear of being taken over by Amazon or Alibaba, that no longer exists now. Walmart’s entry has brought in a level-playing field and start-ups working in the space that are related to e-commerce will get a chance to work with all three,” he added. With healthy competition and no fear of monopolies emerging, consumers’ only stand to gain. The three players would help in building a strong supply chain and logistics which would ensure quicker delivery mechanism. “Shopping online is going to get more convenient now. In fact with both Alibaba and Walmart focussing on omni-channel strategy, consumers can expect a faster delivery and competitive pricing of products and services,” said Dhruv Kapoor, MD, Sistema Asia Fund Advisory.
In April this year, Amazon India increased its storage capacity by 54% to 20 million cubic feet by launching five new warehouses, also known as fulfilment centres, in cities including Gurgaon, Mumbai, Kolkata, Bengaluru and Vijayawada. Paytm Mall has been concentrating on building an omni-channel business that allows customers to buy products seamlessly from online as well as offline stores. Flipkart also plans to leverage Walmart’s omni-channel retail expertise, grocery and general merchandise supply-chain knowledge. Flipkart’s supply chain arm eKart claims to serve more than 800 cities, making 500,000 deliveries daily. This also means that the domestic e-commerce industry should gear up for more acquisitions as these players expand their services. Online grocery, furniture, etc, are some of the areas where these players are expected to focus.
“With Walmart acquiring stake in Flipkart, we expect enhanced thrust on the online grocery segment. We expect online grocery to be the fastest-growing segment in the e-retail space, growing at a 65-70% CAGR to touch Rs 10,000 crore in revenues by fiscal 2020,” said Ajay Srinivasan, director, CRISIL Research. Citing the recent investment of $22 million made by Amazon in SME lending platform Capital Float, Sunil Goyal, director and fund manager of YourNest, an early stage fund, explained, “The aim will be to further expand services. This can be achieved in two ways – either by starting from the scratch or acquiring one. Categories such as furniture and online grocery are key categories which haven’t been explored completely,” he added.
SoftBank and Tiger Global-backed Grofers and Bengaluru-based BigBasket, which recently got $200 million in funding from Alibaba, are the two large players in online grocery segment, besides Amazon that runs two services under Amazon Now and Amazon Pantry, while Flipkart has piloted its grocery business in Bengaluru. This is Flipkart’s second attempt at running an online grocery business. In February 2016, Flipkart shutdown its grocery delivery Nearby, in less than five months of its pilot in Bengaluru due to weak consumer response and narrow margins. The company has piloted the app in October 2015.