With the acquisition of Jet.com, the year-old US based ecommerce startup, Walmart Stores Inc. made its way into ecommerce. Its entry into the lucrative online retail market came at an expense of $3 billion (to acquire Jet.com).
The retailer has phenomenal success in offline retail and it won’t be a surprise if the company tries to replicate the same online. Walmart has the resources to build a formidable online presence. The question is what will online retailers do? Especially Amazon!
In 2015, Walmart’s online sales amounted to $13.6 billion out of its overall revenue of $482 billion. On the other hand, Amazon’s overall sales were at $107 billion last year.
Where will Walmart’s online expansion take it?
Once Walmart is satisfied with is online sales in the US, it is likely it will explore online retail in markets with growth potential. Indian ecommerce growth mirror’s China’s, says Morgan Stanley. The country is the fastest growing ecommerce market and it expected to jump from its $23 billion revenue in 2015 to $38 billion this year that is a 67% increase.
It may be a small figure in comparison to US ecommerce sales of $340, but India has shown promise for foreign online retailer Amazon and encouraged the development of online market leader Flipkart.
Why will Walmart choose India?
Most etailers aim for a global reach and India is on everyone’s expansion map, (look at Amazon, eBay and Alibaba). So it’s very possible Walmart will dabble into Indian ecommerce. There’s also the fact that its online competitor, Amazon has its second largest market in India (according to Amazon.in VP Amit Agarwal) and is the Indian consumer’s favourite.
Walmart already has 21 physical wholesale stores in India, with 5,000 cash and carry format items. It has been a part of Indian retail for almost a decade and is rearranging its operations and building its team and business continuously.
Should Etailers in India be cautious?
Indian online retailers, Flipkart, Snapdeal and the rest, will definitely watch Walmart minutely when it sets foot into Indian ecommerce, says Indian Angel Network’s (IAN) chairman, Saurabh Srivastava said.
“Although Walmart’s acquisition of Jet currently isn’t driven by India consideration, the move will have some implications for sure on India,” he said, adding “with the acquisition of Jet, Walmart will become a key player (in the e-tail business) without any doubt. I am sure all e-commerce companies such as Amazon, Flipkart and others must be thinking how this will play out.”
On the other hand, the CEO of IT and telecom research and advisory firm, Greyhound Research, Sanchit Vir Gogia mentioned that Walmart won’t move out of the States so soon. The main priority at the moment will be dealing with Jet and ensuring a smooth path for it.
He said, “Walmart has been present in India for the longest time with its sourcing business. It understands the sourcing scenario in India but may not be clued into consumer behaviour.”
Gogia also stated that Walmart is a traditional company, meaning transformation will take some time. A “wait and watch” policy may be implemented, in his opinion, to understand the works of ecommerce in India and set up internal competencies. Some hand holding and time is required to get the retailer ready for ecommerce in India.
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