After months of speculation, Walmart finally clinched the deal paying $16 billion for a 77% stake in Flipkart valuing the e-commerce major at $21 billion. While it gives Walmart a strong foothold in one of the fastest growing retail markets, the alliance will give Flipkart enough ammunition to take on Amazon in a market where both are fighting for supremacy. Having Walmart on its side will also help Flipkart reduce its overarching dependence on electronics and smart phones and increase its presence in under-penetrated areas such as food and grocery, which is fast catching everyone’s attention — for a good reason.
Indians spend more than half of their monthly income on groceries. As a result, groceries form more than 60% of India’s $600-billion retail market. Although, online sales still form a very small part of this market accounting for little more than a billion dollars, it is grabbing attention from everyone including offline retailers such as Future Group and DMart (see: Click for convenience). The online grocery segment is attractive for a couple of reasons. One, the frequency of transactions is a lot more in this space since groceries, fruits and vegetables form an integral part of any household’s budget. Two, online consumers put convenience over prices and probably don’t mind paying for the convenience while shopping for groceries. Finding and retaining such profitable customers is obviously the holy grail for online retailers.
For e-commerce majors such as Amazon and Flipkart who have built a significant customer base of nearly 100 million subscribers, groceries offer a great opportunity to increase transactions on the platform thereby increasing the lifetime value of their customers. For Amazon, food and grocery is likely to form more than half of its revenue in the next five years. In a bid