Flipkart announced that it has acquired a 100% stake in Walmart Inc.’s cash-and-carry business and said it will launch ‘Flipkart Wholesale’ next month, as the homegrown e-commerce major looks to tap into the USD 650 billion B2B retail market in India.
A week before Flipkart had said it had raised USD 1.2 billion in funding from a Walmart-led investor group. Walmart India the wholly-owned subsidiary of the world’s largest retailer that acquired Flipkart two years ago for $16 billion has limited standalone presence in the country and it has been operated as Best Price cash-and-carry business that runs 28 warehouse-club-style stores across the country and has amassed more than 1.5 million members.
Flipkart said it is launching a wholesale marketplace to serve small and medium-sized businesses and neighborhood stores in India. Flipkart did not disclose the financial terms of the acquisition.
This is considered as a part of the strategy of the online retailer’s majority owner to consolidate its portfolio in the country, strengthen the supply chain, and ramp up offerings to mom-and-pop stores.
These outlets, branded as Best Price Modern Wholesale, will come under Flipkart Wholesale, which will be launched in August.
Employees of Walmart India business will join the Flipkart Group and the home office teams will integrate over the next year, the companies said in a statement. Walmart India was a wholly-owned subsidiary of Walmart Inc, and is estimated to have about 3,500 employees.
“With the launch of Flipkart Wholesale, we will now extend our capabilities across technology, logistics and finance to small businesses across the country,” Kalyan Krishnamurthy, chief executive officer of Flipkart Group, said in the statement. The acquisition of Walmart India, he said, will add a strong talent pool with deep expertise in the wholesale business, strengthening them and addressing the needs of kiranas and MSMEs.
Flipkart said its wholesale business — to be overseen by Adarsh Menon, a veteran at Flipkart, and Sameer Aggarwal, chief executive at Walmart India — will pilot services for the grocery and fashion categories next month. Aggarwal will leave his current position after the transition and later serve in a new role within Walmart.
“A thing we saw through COVID-19 (outbreak) was kiranas are shopping in more omnichannel ways than before. In our Best Price business, we had a 4X increase in e-commerce within our business, which is primarily brick and mortar. What that tells us is that kiranas are very open to shopping both online and offline,” Walmart India CEO Sameer Aggarwal said.
“For over a decade, we’ve been committed to India’s prosperity by serving kiranas and MSMEs, supporting smallholder farmers and building global sourcing and technology hubs throughout the country. “said Judith McKenna, president, and chief executive of Walmart International, in a statement.
“Today marks the next big step as Walmart India’s pioneering cash-and-carry legacy meets Flipkart’s culture of innovation in the launch of Flipkart Wholesale,” Judith added.
Flipkart Wholesale is a new digital marketplace focusing on addressing the business-to-business (B2B) segment in India. “This marketplace is going to effectively link sellers and manufacturers on one end and kiranas and micro, small and medium enterprises (MSMEs) on the other end,” Flipkart Senior Vice President and Head – Flipkart Wholesale Adarsh Menon said.
Menon added, “These businesses will have one-stop access to an extensive selection of products with attractive schemes and incentives, supplemented with data-driven recommendations for stock selection, delivered through a fast and reliable network to drive greater efficiencies and better margins.”
“The B2B market for finished goods is estimated to be worth USD 650 billion. To start with, we will be focusing on USD 140 billion of that USD 650 billion, which is largely the categories of fashion, grocery, general merchandise, large and small electronics,” Menon said.
Walmart, the world’s biggest retailer, had entered India through a partnership with Bharti Enterprises for a cash-and-carry business that allows small businesses, kirana stores, and hotels to buy in bulk. In 2013, the two companies went separate ways and Walmart continued to scale the cash-and-carry business in India on its own.
Walmart India has been struggling to expand its wholesale business as the foreign direct investment rules don’t permit the firm to sell to consumers directly. Earlier this year, it had also laid off 56 employees as it chased profitability. The firm had doubled its losses to Rs 172 crore for the financial year ended March 2019 even as its revenue rose 11%.
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