Walmart vs Amazon vs Alibaba: The 3-Way War for India’s E-Market

With the Flipkart acquisition, Walmart has resorted to its only option to survive the changing retail landscape.

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With the Flipkart acquisition, Walmart has resorted to its only option to survive the changing retail landscape.

That’s according to Haresh Chawla, partner at private equity firm True North. “A large chunk of the Indian market is infinitely valuable to a company today,” Chawla told BloombergQuint. “Walmart grows by 2-3 percent in US. It has had tough times in other countries. India was the only market left with growth.”


Walmart on Wednesday, 9 May, struck a deal to acquire a controlling stake in India’s largest homegrown e-commerce firm for $16 billion. That pits it against Amazon which already has a strong foothold in Asia’s third-largest economy.

For a company struggling with growth, it’s not an option to not be present in the Indian market that has huge untapped potential, Chawla said. And paying a few billion more is worth it as India’s large customer can “deliver the bang for the buck,” he added.

It’s a big bet. But sometimes when you burn the bridge, you make the bet work. It’s a do or die plan for them.
Haresh Chawla, partner, True North 

Here are the five key highlights from the conversation.


War for Capital

The first challenge for Walmart will be to follow up the Flipkart acquisition by pumping more capital into online retail, Chawla said. And when it comes to availability of capital, both Walmart and Amazon have enough. “Capital is a war both can fight.”

Walmart generates enough free cash flow. Amazon has great valuations to pay the bills from.  
Haresh Chawla, partner, True North 

Similar Genes, Different DNA

India’s e-commerce market now has three major players – Amazon, Flipkart, and, to some extent, Alibaba through its investment in Paytm. While all three operate in the same space, they are fundamentally different, explained Chawla.

Amazon is a technology company masquerading as a retailer, he said. It wants to “make you shop but not make you think about shopping”. On the other hand, Walmart’s focus is to get people into their stores and make purchases.

Alibaba is a breed of its own. It creates an ecosystem with its financial services offering, logistics infrastructure and marketplace. “They are allowing other people to use their infrastructure to provide services to consumers,” Chawla added.


The Future of Shopping

Experiential shopping will take the front seat and everything that doesn’t need to be showcased will move online, Chawla said. In the US, stores will become the nearest distribution centre and warehouse. And food will be a key driver. “Shelf space will be disproportionately skewed toward food,” Chawla said.

In India, it will be a different ballgame because none of these players are allowed to set up physical stores. That means they’ll either have to ally with retailers with a physical presence or buy them out. “Clearly fighting an online only battle is fighting with one hand tied to your back.”

Online players will also commoditise brands and float their own private labels as they have “massive margins,” he added.


Where Do Google and Facebook Fit?

The two data-rich companies will face challenges in matching up to Amazon. That’s because despite a massive customer base, they “have a very thin layer of user engagement,” said Chawla.

That means they’ll rely on forging partnerships with companies that can actually deliver services and products to customers. “The interface will force them to do that.”


Who’ll Win In India?

For some time, everyone.

“For the next several years, you'll find that all of them will grow. The market is growing. Consumers want better shopping experience. Consumerism is coming to India as our minds shifts away from savings,” Chawla said.

However, once that’s done the real issues will start to kick in. And the one with the right blueprint, the right kind of alliances and the right technology will be the winner, Chawla added.

(This story was first published on BloombergQuint)

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