Is Walmart Increasing Its Focus On Indian E-commerce Market?

-9.95%
Downside
60.17
Market
54.18
Trefis
WMT: Walmart logo
WMT
Walmart

WalMart (NYSE:WMT)  is reported to be in partnership talks with Indian e-commerce companies such as Flipkart, Snapdeal, Grofers and Big Basket to tap into the growing online retail market in the country. [1] The company had to stall its expansion plans in the region in 2013 after it discontinued its partnership with local player Bharti enterprises and the Indian government initiated investigations against the company for possible violations of foreign investment rules. After restructuring its operations in India in 2015, the company now appears to be looking at expansion in both offline and online retail markets. [2]While the offline market will be restricted to the B2B space, Walmart’s tie-up with local e-commerce players can give consumers direct access to the company’s products. Amazon intends to invest heavily in India, terming it the trillion dollar opportunity. [3]  Accordingly, we believe Walmart’s entry in the Indian e-commerce space could open up new growth opportunities for the company.

See our complete analysis for Wal-Mart

 Indian Ecommerce Could Be A Promising Opportunity

Relevant Articles
  1. Where Is Walmart Stock Headed Post Stock Split?
  2. Up 7% Already This Year , Where Is Walmart Stock Headed Post Q4 Results?
  3. Up 18% This Year, Will Walmart Stock Continue To Grow Past Q3?
  4. Can Walmart’s Stock Trade Lower Post Q2?
  5. Walmart Stock Likely To See Little Movement Post Q1
  6. Walmart Stock To Trade Lower Post Q3 Results?

Walmart mentioned that it has been approached by several Indian e-commerce businesses for membership and that the company is processing these requests. Walmart terms buyers of its products as “members” in India, given that regulations in the country do not allow it to sell directly to consumers without tie-ups with local players.  Walmart’s Indian revenue was down 32% for the fiscal year ended December 2014 primarily because the company stalled its expansion plans due to regulatory issues and an internal bribery probe pertaining to Indian operations. [1] After restructuring its operations in the region, the company now plans to open 50 new stores in the country by 2020 and expects this number to reach 500 in the next 10-15 years. However all these stores are planned to be B2B or wholesale stores. [2]. With 21 stores, most of them in tier II and tier III cities, Walmart currently does not enjoy a strong presence in India.

However, the growing ecommerce market in the region, which has a huge potential, might provide the necessary boost to Walmart’s revenues. According to a Goldman Sachs report, the Indian e-commerce market will be around $228 billion by 2030, lower than today’s U.S. ecommerce market ($281 billion) but 10 times as large as India’s market today. [4] With 20% internet penetration, retail ecommerce is estimated to be 1.1% of total retail sales in India in 2016, which is much lower compared to 14% for China or 8% for the U.S. [5]. Through tie-ups with ecommerce players in India, Walmart can access the huge consumer base in the region without the need to set up retail stores. This also provides an opportunity for its private label business, which is a high revenue generator for the company. Indian etailer Flipkart is the largest ecommerce player in the region with 44% market share compared to 15% for Amazon. [3] Walmart’s tie-up with Flipkart can prove to be a strategically right move as it aims to capture the ecommerce market in India.

View Interactive Institutional Research (Powered by Trefis):

Global Large Cap | U.S. Mid & Small Cap | European Large & Mid Cap

More Trefis Research

Notes:
  1. Walmart plans tie-ups with online retailers, Business Standard, January 14, 2016 [] []
  2. Walmart rolls out plan to open 500 stores in India, Live Mint, June 2015 [] []
  3. How Jeff Bezos aims to conquer the next “trillion dollar market”. The Inside Story, Fortune, January 1, 2016 [] []
  4. The Epic Battle For India’s E-Commerce Market, The Wall Street Journal, October 2015 []
  5. Retail Sales Worldwide Will Top $22 Trillion This Year, eMarketer, December 2014 []