The Competition among the online retailers is so high that now even the rivals are looking joining hands to get into the good position in the market. In such a move, US-based retailer Wal-Mart Stores Inc. is in advanced discussions to invest as much as $1 billion into India’s online retailer service ‘Flipkart.’
This step by Walmart and Flipkart is seen as a move as the both companies battle Amazon.com Inc. in e-commerce, according to a person familiar with the matter.
Wal-Mart, the world’s largest retailer, would take a minority stake in Flipkart, the person said, asking not to be identified because the matter is private. Final terms of the deal have not been worked out and negotiations are still underway, the person said. Flipkart’s most recent valuation was $16 billion, according to research firm CB Insights.
The deal could benefit both Wal-Mart and Flipkart. The Indian retailer would get access to much-needed capital as funding becomes more difficult to obtain in the country, while Wal-Mart would gain exposure to India’s expanding e-commerce market and challenge Amazon on the better than equal footing than the U.S.
Flipkart is the largest online retailer in India, but its lead has been under assault as Amazon steps up its investments in the country. Chief Executive Officer Jeff Bezos said in June he plans to spend another $3 billion in the country to gain customers in the fast-growing market.
Flipkart declined to comment on this, also a spokeswoman for Wal-Mart said she could not immediately provide comment.
After the U.S. and China, India is the next big online retail market and both Amazon and Wal-Mart have been pursuing the opportunity.
Bentonville, Arkansas-based Wal-Mart earlier had a retail joint venture in India with Bharti Group, which runs the country’s largest telecommunications operator Bharti Airtel. But venture failed to take off and Wal-Mart eventually sold its stake to its partner.
The rate of growth in traditional retail has been modest. But Kotak Institutional Equities recently estimated that online retail will average 45 percent annual growth rates in the next four years and touch $28 billion by 2020.
