Walmart Inc. (NYSE: WMT) has agreed to pay $16 billion dollars to hold an approximate 77% stake in the Indian online marketplace company Flipkart. This sparks a battle in the long-time war between the very well-known online company Amazon.com, Inc. (NASDAQ: AMZN) which is one of the world’s leading ecommerce markets and controls about 30% of the current market.
Talks of this deal have been on and off for two years, and now Walmart has the power to boost their market shares against Amazon, who also was interested in making a rivalrous counteroffer, making this the start of an ecommerce succession war.
Walmart cited estimates of growth in the ecommerce world in India will grow about 36% per year over the next five years which is four times faster than the current and typical retail market they have. Walmart operates more than 6,300 stores in 27 countries, from Africa to Latin and Central America, also including Asia and Canada. Last year, about one-fourth of their 500 billion-dollar earnings came from outside the United States. Though that’s a start to a promising future, their international sales have lowered 12% in the five years. However, Chief Executive Officer of Walmart, Doug McMillon, sees promise and investment in this new deal.
India is right behind China in the world’s largest population which has helped make their marks on their value in the retail market world. “India is one of the most attractive retail markets in the world, given its size and growth rate,” said by Walmart’s Chief Executive Officer, Doug McMillon, on Wednesday in a statement saying that the partnership was a smart investment in a company making leading strides in the ecommerce market. It’s expected to expand from $30 billion today to be worth $200 billion dollars by 2026 according to Morgan Stanley.
McMillon made an additional statement at Flipkarts headquarters in Bengaluru during a townhall stating that Flipkarts Chief Executive Officer Kalyan Krishnamurthy and Group CEO Binny Bansal would continue in their positions.
Though there is hope for a brighter future, Walmart fell 4.2 percent in the premarket trade, this leaves room for anxiety towards dented earnings. The retailer is expecting the transaction to hurt its fiscal 2019 earnings per share by 25 cents to 30 cents each, if the deal closes at the expected time of before the end of the second quarter.