Frost & Sullivan Perspective has provided its insights and take on how “Walmart-Flipkart Deal” would impact the e-commerce industry in India, why is India interesting for Walmart and other retailers, and much more.
Why is India interesting for Walmart and other retailers?
India, with almost 60% population under 35 years of age, high rate of urbanization (almost 2.5% per year), growing middle class etc., is an attractive market for investments. The country enjoys very high mobile device ownership along with almost 500 million broadband connections. Due to better connectivity, increasing outbound travel, exposure to global trends through media as well as through personal experiences, coupled with high disposable incomes, Indian consumers are upgrading their lifestyle and looking at high quality products and services, which is easily available to them. All these factors make India a very attractive place for e-commerce businesses.
Currently e-commerce business is growing at more than 30% year-on-year. If we assess all e-commerce business in India from a consumer point of view, there is a clear pattern of preference for certain companies for certain product categories – broadly food and non-food. Companies like Amazon, Flipkart etc. are preferred for durables, electronics, mobiles and accessories, on the other hand brands like Jabong, Myntra etc. are popular for apparel purchases, and BigBasket, Grofers etc. for purchasing fresh fruits/vegetables, groceries etc.
Currently in India, consumers prefer purchasing non-food items via online portals and apps, although we are witnessing an emerging trend of purchasing groceries and fresh fruits/vegetables online due to its convenience and time saving advantage. This trend is significant in metro cities, but typically smaller towns follow trends emerging in metros, albeit with a time lag. Hence, it is apparent that online shopping for fresh items and groceries will increase even in smaller towns in the country. Technologies like Augmented Reality and Artificial Intelligence will also give a boost to the e-commerce sector in India.
The Indian consumer looks at purchasing good quality products at a reasonable cost and e-commerce portals facilitate this. It offers a wide variety of products at different prices, and the consumer can pick and choose their options at leisure.
Walmart and Flipkart deal:
The deal between Walmart and Flipkart will boost e-commerce business in India, particularly for the food and grocery segment. Indian consumers are particular about buying groceries/food items, which has been traditionally bought in a neighbourhood kirana store or the nearby supermarket. Although e-commerce players like BigBasket and Grofers are preferred sites for food and grocery purchases online, grocery as a segment has less than 5% share both in terms of value and volume. This is primarily because of easy access, good bargain and fresh product availability at the store/supermarket. Walmart’s strength in food and groceries is expected to change this equation in future. We believe the food and groceries segment will occupy a larger share for e-commerce players in the near future. E-commerce players should take proactive initiatives to convince the Indian consumer about the ‘freshness’ of fruits/ vegetables and groceries available with them.
There is a possibility that more and more joint ventures might come up among e-commerce companies to build on each other’s strengths to acquire a larger market share in India. With Walmart acquiring 77% stake in Flipkart, they can together leverage the opportunity of being the largest e-commerce player in both food and non-food segments. Considering Indian food habits and the preference for fresh produce and bargaining (for the price of the produce), eyeing a larger share of market in the food/groceries segment might be an uphill task initially.
The deal will certainly help Indian consumers as both companies have their distinct strengths and coming together will boost healthy competition in this industry, which will ultimately benefit the Indian consumer. This is an exciting phase in India’s e-commerce industry, which is expected to witness major growth in the near future.