Wal-Mart vs. Amazon: Is India The Next Battleground?

Amazon is on overdrive in India. Earlier this year, the world’s largest online retailer became the second-largest online marketplace in the country by shipments and gross merchandise value. (Flipkart remains number one in India.) It also announced an additional $3 billion investment, taking its total investment in India to $5 billion; it launched its popular subscription-based program Amazon Prime to drive customer loyalty; and it announced that it would be soon be introducing its Prime Video service. Recently, in October, the firm launched its “Global Store” for Indian customers enabling them to buy products sold on its U.S. website while paying in Indian currency. Prior to this, while customers from India could buy on Amazon’s U.S. website, they had to pay in dollars.

Wal-Mart vs Amazon

Amit Agarwal, Amazon India’s vice president and country head, says that “enhancing shopping experience” for customers is “one of the key pillars” for the company. With the Global Store, customers in India will have direct access to thousands of international brands and a starting selection of over 4 million global products. While initially the Global Store will have products from the U.S., over time, products from other key markets such as the U.K., Germany and Japan are also expected to be listed. India, which is one of the fastest growing e-tail markets around the globe, is the third country after China and Mexico to get the Amazon Global Store. This move will no doubt help Amazon compete more vigorously against Flipkart.

More importantly, perhaps, it will also help strengthen the company’s arsenal against the imminent entry of Wal-Mart — the world’s largest brick-and-mortar retailer and its arch rival.

Amazon, though, is silent on Wal-Mart’s reported entry into this segment. “We are not competition-focused, but customer-obsessed,” says Agarwal. “Our goals and our targets are only focused on our building a better experience for our customers and sellers.”

Wal-Mart’s Entry: A Matter of Time

According to media reports, Wal-Mart is all set to join the Indian e-tail party soon. While the company is reported to be talking to several Indian e-tailers like Snapdeal and Shopclues, the strongest buzz is around Wal-Mart entering into a strategic alliance with Flipkart or making an investment in the company, possibly to the tune of $1 billion. While both Wal-Mart and Flipkart refuse to comment on what they term as “speculations,” Rajneesh Kumar, senior vice president and head of corporate affairs at Wal-Mart India, says: “E-tail is undeniably a very big change and is here to stay. Understandably, that is where the consumer is going. We believe the next five years will belong to those who commit to provide an omni-channel experience to customers.”

“Think of it as an alliance of the ‘Amazon-worrieds.’” –Kartik Hosanagar

Wal-Mart currently has 21 cash & carry wholesale format stores, called Best Price, across nine states in India. This number is expected to increase to 70 over the next three to five years. According to Kumar, currently all stores (which are open only to commercial and institutional customers) provide an omni-channel shopping experience to the members. “B2B e-commerce is a major driver of growth for us in India,” says Kumar. He adds: “For us, India is a long-term commitment. It is a growing economy and hence an important market. We continue to look at all opportunities and keep scanning the business environment on how we can serve our business members better.”

Industry observers and experts believe that it is only a matter of time before Wal-Mart makes a foray into online retail in India through some kind of an investment or partnership with a leading Indian e-tailer. Kartik Hosanagar, Wharton’s professor of operations, information and decisions, whose research focuses on the digital economy, in particular Internet media, Internet marketing and e-commerce, notes: “Wal-Mart has been interested in India for quite some time now. They explored a partnership with Bharti but that fell through. [In 2007, Walmart had entered into a 50:50 joint venture with Bharti Enterprises. The partnership broke off in 2013.] Internet companies that are more used to a different pace and greater transparency are a better partner for Wal-Mart.”

Hosanagar believes that Wal-Mart’s India strategy will borrow heavily from its China experience: It will “partner with local companies that have better local knowledge.” He points out that in China, Wal-Mart started with a small investment in Yihaodian. Later, it purchased Yihaodian in its entirety. And more recently, it has partnered with JD.com, including selling Yihaodian to JD.com. “This way, it has partnered with China’s second largest e-commerce company to take on Alibaba (the e-commerce leader in China). This also allows Wal-Mart to focus on its offline stores and simply set up an online store on JD.com.”

Hosanagar also points to Wal-Mart’s recent acquisition of Jet.com in the U.S. for $3.3 billion. He notes that even though Jet.com is unproven, Wal-Mart was willing to pay a considerable amount because “it finally found a proven [individual, Jet.com co-founder] Marc Lore, who is willing and capable of taking on Amazon.com.” A partnership with a player like Flipkart will seek to do the same in India, says Hosanagar. “Think of it as an alliance of the ‘Amazon-worrieds.’”

Ankur Bisen, senior vice president for retail at Technopak Advisors, considers Wal-Mart’s reported moves in India to be in line with its global strategy. He says: “With the acquisition of Jet.com in the U.S., Wal-Mart has put e-commerce at the heart of its growth strategy. It wants to protect its status as a dominant global retailer and recognizes the need to align with the rapidly changing world of retail. It also signals that it will not shy away from either building this capability in-house or pursuing acquisition opportunities, or both.” In India, Bisen notes, Wal-Mart has organically built a cash & carry business that has “grown reasonably well” and has also started piloting “multi-channel options” in this business. Says Bisen: “This is in line with Wal-Mart’s global approach of re-modeling brick businesses into multi-channel businesses.”

Rishikesha Krishnan, professor of corporate strategy and policy at the Indian Institute of Management (IIM) Bangalore and currently director of IIM Indore, sees Wal-Mart partnering with Flipkart as a logical move. The current policy environment in India is not conducive for Wal-Mart to make a direct entry into physical retail. But since the policy

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