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Walmart to convert wholesale stores in India into fulfillment centers for Flipkart

In January, Walmart had started restructuring its loss-making B2B business unit in India.

The world’s largest retailer, Walmart, is going all out in putting its weight behind homegrown e-tailer Flipkart, which it acquired for USD 16 billion in mid-2018 as it battles American online retail giant Amazon in India’s soon-to-be USD 84-billion e-commerce market.

The Arkansas-based retail giant is converting some of its wholesale stores into fulfillment centers for Flipkart as a part of restructuring its cash and carry business, local media Economic Times (ET) reported, citing sources.

Walmart India owns and operates 28 wholesale stores under the Best Price brand, which sells an assortment of over 5,000 items to kirana stores and small business owners. Kirana stores are neighborhood stores that sell household items, groceries, vegetables, fruits, and other everyday goods.

“Out of the 28 stores, six will be converted into fulfillment centers,” one of the sources told ET, while another source added that this number is expected to go up in the coming months.

Walmart has been upbeat about Flipkart’s potential to drive growth in India. Earlier this month, during its quarterly earnings announcement, the American retailer said e-commerce contributed 12% of the total international sales for the quarter ended January 31, “led by Flipkart and online grocery sales in several markets.”

This comes amidst the reports of Flipkart acquiring the cash-and-carry wholesale business of its American parent to build its supply-chain muscle for India’s rapidly growing online food and grocery sector. An ET report last month, quoting sources, said Flipkart was looking at “a reverse acquisition of the B2B segment of Walmart,” which if and when acquired “will function as a subsidiary” of the Bengaluru-headquartered online retailer.

Flipkart launched its own online grocery business called Supermart in August 2018. If things go as planned, with Walmart’s cash and carry business under its belt, Flipkart would be able to solidify its relationship with kirana stores, which will give it leverage over its rivals in the soon-to-be USD 10.5 billion e-grocery space. Rivals include Amazon, Alibaba-backed BigBasket, SoftBank-backed Grofers, and the newly launched JioMart, an e-commerce venture of Reliance, India’s largest company by market value. The proposed acquisition will help Flipkart strengthen its supply chain as it would be able to sell food and grocery products to kirana shops, which the online retailer would consequently leverage to cater to end-users.

Last month, Walmart kicked off the restructuring process of its loss-making B2B business unit in India. For the financial year ended March 2019, Walmart’s Indian wholesale unit posted a loss of USD 24.1 million (INR 1.72 billion), nearly twice the amount it posted the year before.

As a part of the restructuring, Walmart fired 56 senior and mid-level executives in the South Asian nation. At the time, the company said, “it was looking for ways to operate more efficiently and that it had made significant investments in its brick and mortar stores as well as e-commerce.”

In fact, Walmart has been realigning its capabilities to bolster Flipkart’s supply chain operations since late last year. In December, Walmart and Flipkart invested an undisclosed amount in fresh produce supply chain startup Ninjakart to get access to fresh produce directly from farmers. Ninjakart connects farmers to retailers through its network of warehouses, as well as fulfillment and collection centers. Prior to Ninjakart, Flipkart had invested USD 60 million in Bengaluru-based hyperlocal delivery startup Shadowfax with an aim to make faster same-day deliveries to boost its 1.5-year-old grocery platform Supermart.