Thursday 14 January 2016

Is Walmart Increasing Its Focus On Indian E-commerce Market?

Indian Ecommerce Could Be A Promising Opportunity
  Walmart mentioned that it has been approached by several Indian e-commerce businesses for membership and that the company is processing these requests. Walmart terms buyers of its products as “members” in India, given that regulations in the country do not allow it to sell directly to consumers without tie-ups with local players.  Walmart’s Indian revenue was down 32% for the fiscal year ended December 2014 primarily because the company stalled its expansion plans due to regulatory issues and an internal bribery probe pertaining to Indian operations. [1] After restructuring its operations in the region, the company now plans to open 50 new stores in the country by 2020 and expects this number to reach 500 in the next 10-15 years. However all these stores are planned to be B2B or wholesale stores. [2]. With 21 stores, most of them in tier II and tier III cities, Walmart currently does not enjoy a strong presence in India.
However, the growing ecommerce market in the region, which has a huge potential, might provide the necessary boost to Walmart’s revenues. According to a Goldman Sachs report, the Indian e-commerce market will be around $228 billion by 2030, lower than today’s U.S. ecommerce market ($281 billion) but 10 times as large as India’s market today. [4] With 20% internet penetration, retail ecommerce is estimated to be 1.1% of total retail sales in India in 2016, which is much lower compared to 14% for China or 8% for the U.S. [5]. Through tie-ups with ecommerce players in India, Walmart can access the huge consumer base in the region without the need to set up retail stores. This also provides an opportunity for its private label business, which is a high revenue generator for the company. Indian etailer Flipkart is the largest ecommerce player in the region with 44% market share compared to 15% for Amazon. [3] Walmart’s tie-up with Flipkart can prove to be a strategically right move as it aims to capture the ecommerce market in India.

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