For all those who might have believed that someday, some Indian company will march ahead and acquire a US-based company, the Flipkart acquisition by Walmart is sort of the death of a dream.
On a positive note, it’s a huge business success for both Flipkart and Walmart. Flipkart, the giant of Indian ecommerce, reached the zenith of its market cap. Walmart, on the other hand, successfully entered the (arguably) largest marketplace in the world.
But let’s flip the coin around. Actually, it’s a case of one loser selling its pride to another loser. Flipkart, despite its 20-billion+ valuation today, could not even break-down in the last 10 years, forget about making profits. Walmart, the largest retail chain in the world could not lure Indian customers in the last five years despite many attempts.
So basically, it was like the sinking Flipkart handed over its oar to a company that does not even stand on its feet in the Indian marketplace.
There are many faces of this deal, but the clearest one being, now it’s a fight of the USA vs USA. Earlier, Flipkart was the biggest barrier for USA-based companies like Amazon to rule the Indian market. Now when Flipkart belongs to the USA (77 percent stack takes everything), Walmart and Amazon would rival on who takes more money to the USA, from the pocket of Indians.
The harsh reality of Indian startups:
India, despite being a country with 1.3 billion brains, does not even have a single noteworthy startup on the map of the world. The reason, the “over-enthusiast Indian entrepreneurs” have a clear dream – make quick money.
So when they get an opportunity to sell their idea for a billion-dollar, it feels like a dream come true for them.
But the harsh truth is – it does nothing better than disturbing the economical and startup conditions of a country. A business with the potential of Flipkart could do much more than just letting a foreign company taking it over.
Alibaba might have got many such offers from Amazon. Baidu had quite-a-few offers from Google. Did these companies accept? No. The reason being, Jack Ma and Robin Li had bigger dreams than those of Mr. Sachin Bansal and Mr. Binny Bansal.
Is it the beginning of Digital Dependency?
Since Walmart tried opening its stores in India many years back, it is clear that they always had an eye of the opportunities.
The only reason why Walmart chose to invest such a whopping amount in Flipkart is that they had no other option but showing its business interest and ‘growth promises for India’.
Indian FDI regulations don’t allow any foreign company to sell its products or open physical stores directly. Thanks to this, we have very few Walmart stores here otherwise Walmart could be more common than ATMs in India.
But now with Walmart playing the Flipkart card, we can very soon witness this scenario.
Who will suffer?
Unorganized retailers, for sure.
As per the Greyhound Research, unorganized retailers share around 90 percent of the $650-billion retail sector in India. Though Walmart has promised to support small businesses and retailers in India by direct procurements, this promise doesn’t seem too promising.
Amazon, being the king of eCommerce, will try its best to partner with big-retail-fishes in India. This will further lead to disappointment for unorganized retailers.
Effect on the Indian Economy
The Walmart-Flipkart partnership and forthcoming efforts by Amazon will produce real risk in the Indian economy by dividing the e-commerce marketplace among them, leaving no space for local competition.
This will also hurt the “Make in India” campaign as the products sold by these giants will be made in India (hopefully), but the profit will reach all the way to the US.
If we compare the international economies, the USA’s internet economy is worth $2 trillion. China stands next with around $1 trillion. On the other hand, entire Europe stands nowhere as its digital economy is worth just $50 billion.
The reason, Europe allowed the USA and China to penetrate its market and let them take hard cash. On the other hand, China banned big fishes like WhatsApp, Google, Facebook and Twitter and produced their own alternatives. The result, their money remains in the country along with fetching hard cash from other economies.
India shouldn’t be the next Europe but it’s on the same track.
What’s surprising (shocking)?
Flipkart, a company that failed to show any profit in last 10 years (in fact, showing huge losses year after year) is valued at $20.7 billion. Investors made huge profits from Flipkart (Softbank multiplied its investment by one-and-a-half in just 10 months), and Mr. Sachin Bansal took home a whopping amount of $1 billion.
There is a company that is an inconsistent loss, still making profits for everyone.
But for whom?
Some foreign investors, a founder, and a foreign company willing to take Indian money to the US.
Essentially, before the deal, it was Flipkart vs Amazon or India vs America.
Now, after the deal, its Walmart vs Amazon, precisely America vs America.
No matter who wins, the USA is the ultimate winner and India is the ultimate loser (in this deal, to be precise).
The deal is nothing but a BLACK DAY in the start-up industry and economy of India. The sad part is, yet another Indian dream was sold for money.
Note: The views expressed in the article are sole of the writer and not of Octal IT Solution.