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Flipkart gears up to take on competitors with USD 1.2 billion check from Walmart

Earlier this year, Amazon announced it would invest USD 1 billion in the country.

Indian e-commerce giant Flipkart has refilled its war chest as the online retail industry in the country recovers from COVID-19 induced slump. It is now gearing up to take on a bigger chunk of the market that is expected to shift from offline to online going forward.

The Bengaluru-based firm has received a USD 1.2 billion check from Walmart Inc., the world’s largest retailer by revenue. Walmart had acquired Flipkart for USD 16 billion two years ago, at a valuation of about USD 21 billion.

A group of existing shareholders including Tiger Global, Tencent, and Accel also participated in the round that bumped up its valuation to USD 24.9 billion, the two companies said on Tuesday. The money will come in two tranches in the current fiscal year.

Local media Economic Times (ET), citing sources, said the recent check will take Walmart’s shareholding up a percentage point in Flipkart, in which it already owns 80% of the stakes.

“We’re grateful for the strong backing of our shareholders as we continue to build our platform and serve the growing needs of Indian consumers during these challenging times,” Kalyan Krishnamurthy, CEO, Flipkart Group, said in a statement.

“Today, we lead in electronics and fashion and are rapidly accelerating share in other general merchandise categories and grocery…We will continue innovating to bring the next 200 million Indian shoppers online,” he added.

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In December last year, Flipkart received USD 377.3 million from its  Singapore-based parent Flipkart Private Ltd. Prior to that, the same parent entity had injected USD 214.8 million and USD 190.2 million in Flipkart in September and January, respectively.

This comes at a time when Reliance’s newly launched e-tail platform JioMart is rapidly gaining ground in the country. JioMart is a joint venture between Reliance Retail and Jio Platforms, the digital arm of the oil-to-retail conglomerate, which is on an expansion spree to increase its nationwide coverage across tier 1 and 2 cities. In May, JioMart was launched across 200 cities. Moreover, JioMart has an edge over competitors due to its partnership with WhatsApp that allows it to sell products directly through Facebook’s chat platform. The partnership was announced when the social media giant came on board as a strategic investor in Jio Platforms in April with USD 5.7 billion check.

It is to be noted that JioPlatforms has raised about USD 15.7 billion from 12 global investors over the past two and a half months. Moreover, Flipkart’s biggest rival, Amazon, in January, had committed an additional investment of USD 1 billion to digitize over 10 million small businesses in the country.

Industry experts predict a window of six to nine months for consumer spending to come back. And that once it gets back, a huge part of it would go toward online. Till then e-tailers are trying to make sure that people keep buying essentials from them and explore more categories.

Flipkart is looking to ramp up its grocery offering, which would intensify the fight among e-tailers in this space that are trying to lure over millions of small neighborhood shops. Locally known as kiranas, these shops are the backbone of grocery delivery in the country.

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Satish Meena, senior forecast analyst at Forrester in a recent interview, told KrASIA, he expects e-commerce to grow at around 6-7%, as opposed to the 20% forecast before COVID-19.

“Even if the cases go down in the next couple of months, there are still going to be a lot of purchases that would shift online. So whenever the spending comes back, e-commerce will be the first to get the benefit,” Meena said. “This window of six to nine months will allow e-commerce companies to add more customers and allow customers to experiment with more categories.”

In a statement, Flipkart said it has surpassed 1.5 billion visits per month and that it saw 45% growth in monthly active customers and a 30% growth in transactions per customer for the fiscal year 2020. Currently, the homegrown e-tailer offers 150 million products across more than 80 categories.

“Flipkart continues to leverage its culture of innovation to accelerate growth…Kalyan and team have a clear vision and are relentlessly focused on giving Indians frictionless choice in how they shop and sell online,” Judith McKenna, president and CEO of Walmart International, said in a statement.