Bengaluru: Walmart is bringing together a bunch of companies at Flipkart to fight two common enemies: Amazon and Alibaba.
The alliance of Flipkart investors represents an extension of the global battle for retail and internet supremacy being fought among American companies Walmart Inc., Amazon.com Inc., Google (Alphabet Inc.) and Microsoft Corp. and Chinese internet giants Tencent Holdings and Alibaba Group Holding Ltd.
Last month, Walmart agreed to buy 77% of Flipkart for $16 billion. It retained Tencent Holdings and Microsoft Corp., among others, as minority investors. The company is also in talks to bring in Google as an investor.
Earlier this month, at a press conference in Walmart’s US headquarters of Bentonville, Mint asked Walmart executives if the company was building an anti-Amazon alliance at Flipkart. Walmart chief operating officer Judith McKenna replied, “I prefer to think of it as a pro-Flipkart alliance.”
When asked why Walmart didn’t buy all of Flipkart and instead chose to purchase a 77% stake, McKenna added, “It’s very deliberate (keeping some minority shareholders at Flipkart). We think that not only does it help bring a healthy diversity of views around the table but it also helps the business succeed in the long term. Flipkart had a very diverse board previously and I’m very excited that companies like Tencent and Tiger (Global Management) and Microsoft are going to remain part of the mix.”
The continuation of Microsoft and Tencent as Flipkart shareholders and the proposed investment of Google into Flipkart are no coincidence. Microsoft and Google are rivals of Amazon, which is a close No.2 to Flipkart in India’s $18 billion e-commerce market. Tencent decided to retain its stake in Flipkart partly because its arch-rival Alibaba is pumping hundreds of millions of dollars into Paytm’s e-commerce business, two people familiar with the matter said.
Google is keen on investing in Flipkart partly because it wants to avoid ceding ground to Amazon in its core search business, the two people cited above said. In the US, Amazon is so dominant in online retail that some people are increasingly going straight to Amazon to search for products rather than using Google.
This has prompted Google to make an aggressive push into e-commerce in the US, a move the firm wants to replicate in India. A strategic partnership with Flipkart is one of the approaches Google is exploring, the people cited above said.
The alliance of retail and internet firms at Flipkart is the latest example of how intertwined the tech business has become and how internet firms are increasingly encroaching on each other’s turf. For instance, a few years ago, it was unthinkable that Google would enter e-commerce or that Amazon could ever threaten Google’s dominance in search and online advertising.
The alliance also highlights the fact that American and Chinese firms, along with Japan’s SoftBank Group Corp., have become key players in India’s internet market. Apart from Flipkart, many large Indian startups, including ride hailing app Ola, payments platform Paytm, food-tech firm Zomato and hotel brand Oyo, count either SoftBank or Chinese firms as their largest shareholders.