Walmart, which had put Rs 743 crore in its digital payments company PhonePe in India in March this year, is more than just ‘pleased’ with how the latter has grown and expanded its services in India even as it competes with Alibaba-backed Paytm, Google Pay, MobiKwik etc., in the digital payments market.
While the company has been “really pleased” with the way PhonePe has expanded from just a payments platform to selling gold online to mutual funds earlier this year but it has also helped them understand more about the payments system. “one of the things they’re (PhonePe) really doing for us is I know much more about the payments business than I did ten months ago,” said Judith McKenna, President and CEO, Walmart International during the company’s investor relations Q&A following its annual shareholders’ meeting on Friday in Bentonville where it is headquartered.
PhonePe team, which was in Bentonville last week, is also helping Walmart with payments business in markets like Mexico. “As we look to markets like Mexico, which is, you heard us talking about cashew, the team from PhonePe are helping advise us about what might be the right routes to go through for that as well,” said Walmart’s CEO Doug McMillon.
Judith McKenna referring to the government’s FDI e-commerce guidelines that barred online marketplaces of selling goods from vendors in which they held stakes and also exclusive brand tie-ups said that the business is now “fully compliant with Press Note 2” even as “it continues to have good dialogue” from regulatory perspective for a “level and fair playing field,” she said.
Myntra, which continues to operate as a separate platform under the Flipkart Group, is also significant for Walmart in terms of apparel as a category. “Apparel is a really important part of that mix (Flipkart Group) for us, because what it provides, of course, is margin mix within that business,” McKenna added.
Myntra’s market share in the Indian online retail market in 2018 stood at 4.7 per cent after Flipkart’s 31.9 per cent share and Amazon’s 31.2 per cent share. Jabong.com, also part of the Flipkart Group, had a 1.7 per cent market share, as per a May 2019 report by Forrester.
Importantly, while Walmart has been betting big on Flipkart growth, it had pulled down former’s earnings from its international business along with a decline in its overall operating income. Walmart, which follows February-January as its financial year, had recently announced its Q1 FY20 earnings.
Walmart’s operating income from the international business came down by 41.7 per cent from $1.3 billion in Q1 FY19 to $700 million in Q1 FY20 largely due to “dilution from Flipkart, which was expected, partially offset by the deconsolidation of Brazil,” said Walmart’s EVP & CFO Brett Biggs in a statement sharing the results.