Walmart is preparing to spend over $2.5 billion in India as the retailer doubles down on the opportunities it sees in India’s e-commerce and payments markets even as the firm contends with rising costs amid market downturns.
Majority Stake in PhonePe and Flipkart
Walmart spent about $780 million earlier this month in taxes after PhonePe, in which the retailer owns a majority stake, moved its domicile to India from Singapore. Walmart is also looking to invest between $200 million and $300 million in PhonePe’s ongoing funding round, according to a source familiar with the matter. (PhonePe declined to comment.)
The U.S. company, which owns a majority stake in Flipkart, is now looking to spend about $1.5 billion to buy back the e-commerce firm’s shares from early backers Tiger Global and Accel Partners, Indian newspaper Economic Times reported Thursday.
India’s E-commerce Market: A Key Battleground for Walmart and Amazon
India, the world’s second-largest internet market, has become a key battleground for Walmart and Amazon. Amazon has spent over $9 billion in India (including investments for AWS cloud regions in the country) over the past decade. Walmart, which missed the e-commerce race in the U.S., has coughed up over $20 billion on Flipkart and PhonePe to buy the lion’s share in India’s e-commerce and payments markets.
Flipkart leads the e-commerce market in India, according to Bernstein. And PhonePe commands over 40% of all transactions on UPI (Unified Payments Interface), a payments network in India built by a coalition of retail banks. UPI, which processes over 7 billion transactions a month, is the most popular way Indians pay online.
Amazon’s Different Approach
As Walmart makes splashy moves, its rival Amazon is taking a different approach. Amazon has spent the past few months streamlining its business in India. It has shut some of the newer bets — food delivery, wholesale distribution, and an attempt at online learning. But the company appears to be continuing to invest in its core e-commerce business in India.
Amazon faced a very public setback in the country last year after India’s largest retail giant Reliance outwitted the American firm into securing retailer Future Group’s assets. Amazon went public with its frustration, and then entered the quiet mode.
Amazon Air Launched in India
In one of the first major announcements in two years in India, Amazon launched Amazon Air in the country earlier this week. But the company’s top country managers were absent from the event, according to a person familiar with the matter.
Challenges Ahead for Amazon in India
Amazon is facing an "unfavorable" regulatory environment, struggles to expand in India, and has been making significant investments to improve its logistics and supply chain operations.
Walmart, on the other hand, seems to be benefiting from the market conditions. The company’s decision to invest heavily in PhonePe and Flipkart has paid off so far. With a majority stake in these companies, Walmart is now well-positioned to dominate India’s e-commerce and payments markets.
What Does This Mean for Indian Consumers?
The increased investment by Walmart and Amazon in India’s e-commerce market will likely lead to more competitive prices, better logistics, and improved customer experience. Indian consumers stand to benefit from the intense competition between these two giants.
However, the regulatory environment in India is a significant challenge for both companies. The Indian government has been scrutinizing foreign investments, especially in the e-commerce sector. This could potentially hinder the growth of these companies in the country.
What’s Next for Walmart and Amazon?
Walmart and Amazon will continue to compete aggressively in India’s e-commerce market. With their vast resources and expertise, they will try to outmaneuver each other and capture a larger share of the market.
The outcome of this competition will be fascinating to watch. Will Walmart’s decision to invest heavily in PhonePe and Flipkart pay off? Or will Amazon’s different approach lead to success?
Only time will tell. But one thing is certain: India’s e-commerce market has become a key battleground for these two giants, and Indian consumers are the ultimate winners.
Key Statistics
- Walmart spent $780 million earlier this month in taxes after PhonePe moved its domicile to India from Singapore.
- Walmart is looking to invest between $200 million and $300 million in PhonePe’s ongoing funding round.
- Amazon has spent over $9 billion in India (including investments for AWS cloud regions in the country) over the past decade.
- Walmart has coughed up over $20 billion on Flipkart and PhonePe to buy the lion’s share in India’s e-commerce and payments markets.
- UPI processes over 7 billion transactions a month, making it the most popular way Indians pay online.
Conclusion
Walmart’s decision to invest heavily in PhonePe and Flipkart has paid off so far. With a majority stake in these companies, Walmart is now well-positioned to dominate India’s e-commerce and payments markets. Amazon will continue to compete aggressively in India’s e-commerce market. The outcome of this competition will be fascinating to watch.