Industry Players welcome Walmart Entry
The acquisition of Flipkart by Walmart has dominated business discourse over the last one month. Industry insiders tell Fibre2Fashion what they feel about the deal.
The acquisition of Indian e-commerce biggie Flipkart by an even bigger American retail giant Walmart has had all observers and stakeholders discussing possibilities and futures. Most welcome the deal, and are agreed that it will change the e-commerce landscape. On retail, the opinions are divergent.
Woodland managing director Harkirat Singh sees the acquisition as a game-changer, especially for small-scale vendors/retailers. “The packaging, logistics and warehousing industries are flourishing. India has to increase the variety and quality of products available. Walmart’s entering India will benefit customers as they will now have access to a wide variety of products and services, and an organised online market. Small and medium-size suppliers will generate a strong push to find new distribution avenues.”
Bonjour MD RK Jain adds, “In India, the e-commerce market has been active for nearly a decade. Walmart certainly has a strategy and their presence is a positive for the Indian e-commerce industry as a whole because large global players entering the e-commerce market signals high expectations. India’s e-commerce industry will grow, and a more positive environment will be created.”
Monte Carlo president, Rishabh Oswal, too believes the Walmart-Flipkart deal will shake things up. “The world’s biggest retail deal will impact the whole segment, competitors and consumers. It’s an unnerving scenario for online sellers as Walmart could wipe them out. Walmart is a $500 billion American conglomerate, and is a direct threat to small businesses with ultra-low prices. Walmart might bring its own private labels to Indian consumers via Flipkart. These products would be brought in at hyper-competitive prices, which will eat out the market and make it difficult for other sellers to operate.”
But Jain contends that e-commerce and retail will co-exist “as each has its own value, and each complements the other. It is up to the customer to decide which channel he or she chooses to buy from. Consumers may decide to buy online or offline or both; for instance, a customer may buy a phone either from a store or online; the same phone is available from both sales channels. Walmart’s huge presence won’t change the fact that India is a unique market where people have different shopping preferences.”
Hemant Agarwal, CMD of V-Bazaar Retail Pvt Ltd sees the start of a new innings for all e-commerce players: “The acquisition of Flipkart is definitely going to drive big change in the Indian retail trading community. Walmart plans to use Flipkart’s expertise to expand globally and this would be a good challenge for the local trading community. However, with constant innovation and adaptation, the local retail community can not only be at par, but also beat (those from) overseas.”
Jain, however, does not see Walmart controlling the retail trade overall “for the simple reason that there is a gulf between buying online and offline. When a consumer buys offline, he or she has a product available immediately whereas purchasing online means having to wait, often for nearly a week or even longer, before taking possession of a product. Furthermore, an offline product may not be as advertised and once purchased a consumer may decide that a product purchased offline does not meet his or her expectations. Customers who are unsatisfied with an online purchase may decide to have the product replaced leading to further delays in owning the desired apparel.
“Other advantages of buying offline are that a buyer can see before paying for a product and judge with their own eyes whether it has any flaws. Being able to actually touch and feel a product is another huge plus for offline purchases. Also, there is very little chance of being cheated while making an offline purchase while purchasing online exposes consumers to a greater risk of paying for an unauthentic or damaged product. Specifically on Walmart’s entry into the Indian e-commerce market—because Walmart is a huge global player, (I believe) the size of the Indian offline retail industry will grow larger.”
Almost in the same breath, Karan Behal, founder and chief executive of PrettySecrets perceives the acquisition to be a good sign, which “may lead to a lot of benefits for the trading community if Walmart brings its supply chain capabilities with it. Given India’s population and domestic demand, both small-time traders and Walmart can co-exist, rather than feed off each other.”
On the fashion element, Jain points out “The garment retail business of Indian companies will not be impacted whatsoever, at least in the short term because retail trade is already expanding at a healthy rate. As the retail sector is growing hand in hand with the digital sector, Walmart’s majority stake in Flipkart is unlikely to have any impact on the revenues of offline retailers of garments and apparel. An analogy that makes this clearer is that the increase in the number of online pharmacies has not led to any decline in the number of offline chemist shops. Any real impact (of Walmart’s ownership of Flipkart) will be visible only five or ten years hence. An immediate impact may be that more Indians begin to purchase apparel products online. Because the buying behaviour of Indians is deeply ingrained, their willingness to shift en masse to buying apparel online is highly unlikely. This is one reason why we believe that for the Walmart effect to be felt in India will take at least several years, if not much longer.”
Sanjay Sethi, chief executive and co-founder of ShopClues, says, “The Flipkart team has done an awesome job in bringing the world’s largest retailer to India. The deal is a great endorsement of the large opportunity that the Indian market presents, and shows that there is a lot of money to be made in the Indian startup ecosystem. In the short term, nothing much will change, but how Walmart approaches the market will surely have an impact on the e-commerce ecosystem in the long term.”
Jain joins the dots: “Unlike in the West, more people in India want to purchase apparel after having felt the fabric with their own hands. Also concerning apparel, few Indians—particularly those from the older generation—purchase clothes online. For the simple reason that a far fewer percentage of Indians buy online as compared to consumers living in Europe or North America, Walmart’s decision to buy a controlling stake in Flipkart will have a minimal impact on the revenues of offline apparel retailers in India. The Indian offline marketplace is different from the online marketplace; the two markets exist side by side yet remain distinct. However, experts also acknowledge that the online market will grow in size because of Walmart’s greater presence in the country.”
The Need for Regulation
From the fate of small-time retailers the country over to the spin-off effect that a booming e-commerce sector will have on warehousing/logistics/packaging, the debates over issues have ranged from the academic to the contentious. Many have been calling for new regulations for e-commerce.
Singh sees no need for such regulations. He argues, “The government of India—instead of imposing complicated policies or regulations—should rather encourage e-tailers to expand their businesses. It not only will benefit people, but also the economy. It helps to minimise logistics, resources, investments, physical assets, and more. Another concern is the cyber security-related issues of e-commerce in India. Those must be efficiently managed by the Indian government so as to avoid cyber crimes.”
Agarwal, however, feels a need: “Only goods manufactured in India should be sold in the e-tail sector in India. The government can also take steps to regulate the price war with foreign players.” Behal believes that “e-tail should be brought under the purview of retail, or even the marketplace-oriented model. Tax laws also have to change to ensure a level-playing field for both traditional retail and e-commerce.”
Sethi thinks that the role of government cannot be over-emphasised in the growth of an industry. “China and the US are both great examples in this respect; their domestic e-commerce policies and the size of their economies allowed them to create the most powerful companies of the world often collectively named GAFAAM (Google, Apple, Facebook, Amazon, Alibaba and Microsoft). The Indian story is coming of age and the current discourse at the World Trade Organization (WTO) and other forums has precipitated an urgent need to formulate and spell our comprehensive domestic e-commerce policy which will in turn become the basis for our global position on e-commerce.”
Jain is both direct and circumspect, “This is a matter of government policy. As consumers are free to shop online or offline, for the government to create regulation specific for e-retailers as opposed to all retailers—whatever be their channel of sales—seems unnecessary. All products that are available for sale online are also easily found offline. There is no compulsion for anyone to buy products using an online platform; so special regulation for e-retailers does not seem warranted as consumers can freely choose which platform to buy from. Considering that all products sold by e-retailers are available offline as well, making additional regulation for one channel (e-retailers) seems unnecessary.
“However, the government should secure the rights of online consumers. It should promote policies that ensure that if a product purchased online is found to be unsatisfactory the steps to have the product replaced with a suitable product are firmly in place and adhered to by e-tailers. There exists a need to create consumer-friendly regulations surrounding existing flaws in the sphere of replacement of products purchased online. The replacement guarantees that many online retailers offer must be honoured. Importantly, the products being sold by e-tailers must be as advertised and fully genuine products. Government regulation surrounding this may be leveraged using the trusted Indian Standards Institute (ISI) guarantee for all genuine products available for sale on e-commerce websites.”
Oswal differs, “The government can regulate the e-tail business in a manner that safeguards the interests of both consumers and local vendors, and at the same time help the industry grow. The e-commerce sector has grown so far even without government support and has immense potential to pump up the Indian economy. However, when foreign giants like Walmart pose a threat to local business, government regulation is required. It must be such that it actually helps the industry to grow.