To fight Amazon and Reliance JioMart, Flipkart wholesale will pick up Walmart’s best price

Walmart has long been scouting for a viable and competitive business model for the Best Price brand, which consists of 28 stores and ecommerce operations.

Bengaluru: Flipkart said its wholesale unit will acquire parent Walmart’s loss-ridden cash-and-carry business in India, Best Price. This marks consolidation of the US major’s entire retail portfolio in the country.

The deal announced on Thursday clears the decks for Flipkart to expand its business-to-business vertical and take the fight to Amazon and Reliance JioMart in wooing legions of small retailers.

Bengaluru-headquartered Flipkart — acquired by Walmart for $16 billion in 2018 — will launch its wholesale unit next month, with categories such as fashion and grocery. This will pit it against a slew of rivals, from JioMart and Amazon B2B to business commerce enabler Udaan and German retail giant Metro Cash & Carry.

“With the launch of Flipkart Wholesale, we will now extend our capabilities across technology, logistics and finance to small businesses. The acquisition of Walmart India will strengthen our position to address the needs of kiranas and MSMEs uniquely,” said Kalyan Krishnamurthy, chief executive, Flipkart group.

The company declined to share financial details of the deal, only saying that Walmart India employees will move to Flipkart group.

ET reported in its January 13 edition that Walmart had let go of nearly 100 senior executives — including vice-presidents — across sourcing, agri-business and the fast-moving consumer goods divisions. The report said the downsizing was a precursor to a sale or consolidation of the unit with Flipkart.

Analysts are of the view that consolidating retail units will boost Flipkart’s ambitions in grocery retailing. “This is in line with Flipkart’s plan to be aggressive in grocery, and use customers and assets created by Walmart to prepare for the battle with Jio and Amazon,” said Satish Meena of Forrester Research.

Walmart India chief executive Sameer Aggarwal told ET the combination “allows us to grow much faster and become bigger.” The Best Price operation will continue to run as it is, he said, while clarifying that “in terms of legal structure, Walmart India is currently a separate entity within the Flipkart group.”

Walmart has long been scouting for a viable and competitive business model for the Best Price brand, which consists of 28 stores and ecommerce operations.

Top Priority for Ecommerce Players
Accumulated losses for Walmart India stood at ₹2,181 crore until March 2019. In fiscal 2019, the company reported revenue of ₹4,095 crore on a loss of ₹172 crore. In contrast, Metro AG posted 10% growth in net sales, to ₹6,755 crore, during the year ended September 2019, according to its global annual report, which also said the Indian unit has been profitable for the past two years.

Aggarwal will remain with the company during the transition and will then move to a different role within Walmart. Adarsh Menon, senior vice president at Flipkart, who leads the B2B initiative said Flipkart Wholesale “will draw on the merchandising experience of Walmart India, strong relationship with brands, and the 12-plus years of operating Best Price.”

With Covid-19 accelerating the willingness of small businesses to adopt technology for expansion, a new market has opened up for ecommerce players. According to a report by Redseer Consulting, three of four mom-and-pop stores have no exposure to technology platforms for any service, including payments or procurement. Forrester’s Meena said, “Given the structure of our market, small merchants and kirana shops remain the top priority for (ecommerce) players.”

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