For two of the biggest U.S. retailers, one of the most important battlegrounds in the struggle for dominance is on the other side of the globe.
Both Walmart, with a foundation in bricks-and-mortar stores, and Amazon, which built a fortune in e-commerce, are executing aggressive expansion plans in India, whose population of 1.28 billion makes it the second largest nation in the world.
Walmart’s recent $16 billion purchase of a majority stake in India’s biggest e-commerce site is the retail behemoth’s most significant foray into the country to-date and puts renewed pressure on Amazon, even as each firm builds a more muscular presence in what has been its rival’s key strength.
Amazon has made a string of major purchases and formed partnerships to offer physical sites in key U.S. markets, while Walmart remains the largest U.S. retailer and, despite struggling to grow its online offerings, has made significant acquisitions to bolster its e-commerce business.
The expansion strategies of both companies illustrate the increasing pressure on businesses to adapt to the “whatever, whenever” mentality of consumers, particularly millennials who came of age in a Web-based environment.
“Everybody’s going to move to this omnichannel environment, some combination of physical and online,” Barbara Kahn, professor of marketing at the Wharton School of the University of Pennsylvania, said in an interview. “It’s just going to be what happens everywhere.”
Walmart’s acquisition of a majority stake in Flipkart, Amazon’s most significant rival in India, signals a new stage in the global fight. The country represents a major growth opportunity for both companies, but a difficult regulatory environment has slowed expansion.
“India has been a battleground for e-commerce for a number of years now, and a lot of it has been stifled by the regulation in India,” said Rajiv Kohli, a business professor with the Raymond A. Mason School of Business at William & Mary. “There’s a huge potential there. But the problem that I think both these companies will have, perhaps to a lesser extent Walmart now with Flipkart, is understanding the local customer.”
Amazon already holds a roughly 30 percent share of the Indian market and reportedly made its own bid for Flipkart, which controls a similar portion.
Such a deal would probably have drawn heightened scrutiny from regulators already skittish over the anticompetitive risk posed by Amazon, and the speculation around it shows just how nervous the Seattle-based e-retailer is about Walmart’s entry.
“No one had been really making any money in the India e-commerce market — even right now [Amazon is] not profitable,” said Dan McCarthy, an assistant professor of marketing at Emory University. “This acquisition just pushes out that timeline to profitability even further because now they have a competitor who has much deeper pockets.”
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