Walmart deal: Ecommerce industry to see intense competition

Walmart deal: Ecommerce industry to see intense competition

FILE PHOTO: A Common myna sits next to the logo of India's ecommerce firm Flipkart installed on the company's office in Bengaluru. REUTERS

The Indian ecommerce sector is set to witness intense competition with the acquisition of Flipkart by US retail giant Walmart Inc. The deal will give additional ammunition to compete with its American rival Amazon, which on Tuesday announced infusion of Rs 2,600 crore additional capital.

“Expect the status quo to remain within the year after the Flipkart-Walmart deal is completed. This is an extension of Walmart’s global expansion strategy. This should not be observed without mention to Alibaba Group’s intent to become the third player in India,” Adrian Lee, Research Director, Gartner said.

The competition will get more aggressive as Amazon counter offers Walmart for a stake in Flipkart. Both have their own sizeable cash reserves, and the outcome in India will determine the access to its growing middle class consumers for dominance, outside of the US, he said.

“Consumers should not expect significant changes in their shopping experience. However, user choice should be improved, with a greater range of Walmart private labels differentiating the merchandise. Flipkart will diversify its inventory to attract more Indian consumer segments that still haven’t started shopping online,” Lee said in a statement.

With the massive user base, India looms as an attractive market for retailers. It is currently estimated that 15% (200 million) Indian consumers will be shopping online by end of 2018, and the relatively untapped growth potential is attracting the commerce giants.

Homegrown companies stand to benefit in the long run. “As consumers are more attuned and comfortable to shopping online with ecommerce marketplaces, we see vertical specialists (largest categories being fashion, second electronics) benefiting. High value, more discerning consumers who want differentiated choices and unique offers will seek out specialists to fulfill this need,” the Gartner official said.

He further added, “Smaller players constantly face a problem of scaling up their operations. However, this does not mean that they will be forced to exit. The smaller players in many cases are more agile and open to new business models. They should concentrate on specialisation within their domains to build up a valuable cache of users seeking differentiated retail experiences.”

He, however expects that discounts will continue in the Indian ecommerce industry. “As the ecommerce players mature into more profitable businesses, it is very unlikely that discounts will stop. More of the promotional support will be passed back to the suppliers who want the user traffic,” Lee added.