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  • Flipkart is India's Amazon.

  • It's the country's largest online retailer.

  • In 2018 retail giant Walmart announced its intention to acquire a controlling stake in the company for $16 billion.

  • Making this the largest e-commerce acquisition ever.

  • Flipkart was founded here in Bangalore in 2007 by Sachin Bansal and Binny Bansal, two Indian software engineers, that happen to share the same surname.

  • They both worked for Amazon in the U.S. before returning to India to start their company.

  • Like Amazon, Flipkart began as an online bookstore.

  • In its first full year of business, it delivered nearly three and half thousand shipments of books.

  • Now its website has 10 million page visits a day and sells more than 80 different categories of goods, which includes everything from food processors to yoga mats.

  • This expansion has been supported by the company's own digital ecosystem.

  • In 2009 it founded Ekart, its in-house supply chain arm.

  • Ekart is now India's largest logistics company delivering 10 million shipments a month for Flipkart, as well as independent brands and sellers.

  • It also owns PhonePe, an app the company acquired in 2016, which helps facilitate electronic payments throughout the country.

  • In addition, Flipkart's purchase of two of India's leading online fashion retailers:

  • Myntra and Jabong ensured the company remained the leading player in India's online retail industry.

  • Flipkart's strong position in the market attracted $1.4 billion of investment in 2017 from Microsoft, eBay, Tencent and SoftBank.

  • The Indian e-commerce market as a whole is set to quadruple to $200 billion in the next eight years.

  • And by 2034 it's predicted to surpass the U.S. as the second largest e-commerce market in the world.

  • The predicted growth in e-commerce has increased competition between the big online retailers.

  • Amazon has been taking on Flipkart in its own backyard.

  • Both have been offering massive sales and discounts pegged to Indian festivals as they battle it out for more customers.

  • While Amazon's size and profitable cloud computing service allows it to absorb these costs, Flipkart has suffered losses in its struggle to compete.

  • However, the Flipkart Group as a whole still has the largest share of the market and remains the e-commerce leader in India.

  • Walmart's online sales, however, account for just a little more than three and a half percent of its business in the U.S.

  • Acquiring Flipkart gives them a considerable foothold in the sector.

  • Yet when news of the deal broke, the American retailer's shares tumbled four percent.

  • With investors concerned that the company had a long way to go before becoming profitable.

  • The acquisition of a loss-making business also cut Walmart's profits at the end of 2018 and its earnings outlook for 2019.

  • The company also warned that e-commerce growth would be slower next year.

  • For Flipkart, Walmart's investment is seen by many as a major boost to the company's logistical operations.

  • It will also help it move into new areas like online groceries.

  • Water, please.

  • Along with a strong food supply chain, Walmart's financial support will also help Flipkart keep prices low in its battle with Amazon.

  • Several key investors have exited the company, including co-founder Sachin Bansal, and they leave with hefty profits.

  • Venture capital firms Accel and Tiger Global invested when Flipkart was valued at just $50 million.

  • They have now pocketed more than 400 times what they invested and still retain some shares.

  • Softbank is also a big beneficiary of the deal.

  • Its Vision Fund invested $2.5 billion in 2017.

  • And in just over 12 months the Japanese company sold its 20% stake for $4 billion.

  • Co-founder Binny Bansal had planned to stay on as the company's chief executive.

  • But resigned after an internal investigation into serious personal misconduct following an accusation of sexual assault.

  • He still owns 4.2% of the company and remains a director on the board.

  • Amid the controversy, Walmart increased its stake in the $20 billion company from 77% to 81.3%.

  • Offering another sign of its support of an online retail market that is still small by global standards.

  • The value and sale of Flipkart to a major corporation like Walmart will likely encourage investors to see India's e-commerce market as an area of growth.

  • Already the Indian startup Ola is competing fiercely with Uber in the taxi aggregation market.

  • And both have Softbank as a major shareholder.

  • As the world's major tech companies focus more of their attention on India, Flipkart may be the first of many start-up success stories emerging from the growing e-commerce space.

  • Hi guys, thanks for watching our explainer on Flipkart.

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  • So, do you think Flipkart has a chance against Amazon?

  • Comment below the video to let us know.

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Flipkart is India's Amazon.

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What is Flipkart? | CNBC Explains

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    Celeste posted on 2019/06/01
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