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Can Wal-Mart compete with the e-giant Amazon in the Indian E-commerce platform? | SWOT Analysis | PEST Analysis | Customer and Competition Analysis

Introduction

Founded in 1962, Walmart is an iconic American multinational retail corporation that operates across 27 countries in 11,503 stores. Walmart appeals to customers through its attractive pricing of products and the availability of wide range of products. Walmart is the largest company by revenue and the largest private employer. Walmart retail stores were a huge success in the US. They stepped into the e-commerce sector since 2000 by introducing walmart.com which allowed the US citizens to purchase goods from their online store. The competition between Wal-Mart and Amazon is one of the biggest rivalries in the business world. Both the business giants are in the run to dominate both the retail and e-commerce sector by expanding their roots across various countries and by acquiring other companies. In the e-commerce, Amazon’s numbers remain dominant because of their amazing web services and understanding of the Big Data in order to understand what the customers really want. The competition between both the companies can also be seen in the Indian context So, I have chosen to investigate whether Wal-Mart can compete with Amazon in the Indian E-commerce platform.

Methodology:

This commentary will discuss how Walmart can sustain in the Indian E-commerce platform despite of the fierce competition from the e-giant Amazon and other online retailers in India. The external factors that can influence Walmart’s growth will be analyzed through SWOT, PEST and a customer and competition analysis. This commentary will be based on IBEF e-commerce report 2018 and three other online business news articles. 

Commentary 1: SWOT Analysis

Strengths

Weaknesses

·       Brand recognition.

·       Acquisition of Flipkart

·       Walmart ‘Fulfillment centers’/’Dark stores’

·       Walmart’s strong B2B E-commerce strategy

·       Walmart ‘Best Price cash-and-carry stores.

·       Diversity of products

·       Ultra-low and competitive pricing

·       Walmart has been into the India markets and has gained experience through joint venture.

 

·       Walmart’s in ability to adapt to foreign culture

·       Walmart’s record of failed acquisitions in the Germany, Korea and other Asian and European countries.

Opportunities

Threats

·       India is the fastest growing E-commerce sector

·       10 million Kirana stores in India

·       Demographics of India

·       Availability of cheap labor

·       Market shift towards online shopping and digitalization10.

·       India’s start-up ecosystem.

·       Strategies adopted by IBEF to enhance the Indian e-commerce sector

 

·       Government policies on the e-commerce sector.

·       Amazon’s dominance on web services and understanding of big data.

·       Ultra-low and competitive pricing

From the prepared SWOT chart, it seen that Walmart has more strengths compared to its weaknesses. Their major strengths are the strategies that they have adopted. However, having a bad history of Walmart’s acquisition in other foreign countries such as Germany, Korea, UK and in some parts of North America, acquisition of Flipkart seems to be their best strength. Flipkart being very well established in the Indian E-commerce sector can help Walmart to reduce the risk of competition arising from other e-commerce business organizations and increase their sales and profit margin. But the government restrictions based on the competition laws to avoid unhealthy competition in order to save the local business can become a major threat to Walmart. In this case, Walmart’s biggest strength, low-pricing strategy can become a threat to itself due to the country’s competition laws. But in general, the Indian turf land seems apt for Walmart to expand considering the vast opportunities and lesser threats. 

Commentary 2: PEST Analysis

       Political:

·        Indian government's newly updated FDI policy is going to severely affect the e-commerce business which includes Flipkart and Amazon. Due to the updated FDI policy, if Flipkart is forced to remove 25% of their products, it may cause an overall of 40% reduction on their revenue and adding up the compliance cost, it can lead up to an incremental loss of $280 million to Wal-Mart from Flipkart. This will ultimately cause a negative 1.3-1.5% impact for Wal-Mart on their ebit/EPS and a reduction on 48% of Flipkart's market share.

·        The Indian Union budget has allocated Rs. 8000 crores ($1.24 billion) BharatNet project to provide broadband services to 150,000 villages. The helps the local village people to connect to the online world and access to a world where they can purchase goods and services just sitting at their home.

·         ‘Udaan’ is a B2B online trade platform that will connect small and medium manufacturers to wholesalers and retailers. This is an initiative of the Indian government under the Digital India movement.

        Economical:

  • India is the second largest growing economy after China and e-commerce is one of their fastest growing channels for commercial transactions. The Indian e-commerce market is expected to grow $200 billion by 2027 and as of 2018 it is $48.5 billion. This growth is due to the increasing internet and smart phone usage especially by the youth in India. Also, the Indian e-commerce market revenue is expected to hit $120 billion by 2020, growing at a rate of 51%, the highest in the world17   

         Social:

·    There is an observable change in the consumer demographics of India. People are turning towards online shopping, especially the present generation. This is mainly due to the technological advancements benefits that they receive from such a mode of purchasing things rather than approaching a physical store. 

·        India has ample amount of youth unlike any other country. This can give a potential benefit for Wal-Mart because the youth’s exposure to internet and technology and the usage of it.

Technological:

·        Wal-Mart has set up a Wal-Mart Lab in Bengaluru, the silicon valley of India and Wal-Mart’s only technological unit located outside the US. Right from the innovation related to the logistics management, managing the stocks at the warehouses or even at the retail store and latest technological advancements that can be used, all such decisions are taken in this lab and most of the technological related innovations are made from India. Wal-Mart has employed 2000 workers that include engineers, data scientists and developers at the Wal-Mart lab. “In the last two years, we have seen a lot of momentum. There is a great talent in India and we are ramping up our hiring activity with an aim to bring out more solutions. relevant to retail business, globally,” Hari Vasudev, Country Manager and Vice-President at Wal-Mart Labs India.


From the PEST analysis it is seen that the technological, social and economical factors are very much in favor for Walmart. Exploiting the economical and social changes will allow Walmart to expand their customer base and future activities. However, the political factor i.e. FDI policy will severely affect Walmart’s sales. Other Indian based online companies will take advantage to build and compete in the e-commerce. Despite of the revised FDI policy which affects Walmart’s B2C operations, the online trade platform ‘Udaan’ will be a chance for Walmart to comeback to the e-commerce sector through B2B operations which is discussed more in commentary 3.

Commentary 3: Customer and Competition Analysis

In order to evaluate whether Walmart can compete in the Indian E-commerce sector it is necessary to analyze their customers and external competitions. Walmart sell their products in their ‘Best price cash-and-carry stores’ and Fulfilment centre/ Dark stores’ at wholesale rates. For many customers the ease of shopping from Walmart will be quality products available at lower prices (wholesale rate). Even the online purchasing facility from the above mentioned Walmart stores also makes the shopping for the customer more convenient. In fact, their direct customers are retailers and cash-and-carry clients. Through this B2B e-commerce strategy Wal-Mart has come up with a program called ‘Mera Kirana’ that helps to scale up and prosper the local ‘Kirana stores’ and further make part of their mainstream business. Implementation of this strategies made it easier for Walmart to expand the customer base because a lot of small business groups were able to effectively manage their inventory and reduce operational cost and pass on their savings to customers since they were able to purchase goods from Wal-Mart at a cheaper rate compared to the other wholesale business entities such as ‘Metro Cash’ and ‘Carry Pvt.Ltd’. As a result, Walmart is able to compete with already established business entities through their pricing strategy, online purchase facilities and ‘Mera Kirana’.  


Conclusion

Based on my analysis, Wal-Mart has executed an amazing business strategy to operate its functions in the Indian e-commerce sector. Their B2B ecommerce strategy which includes the concept of ‘Dark stores’ and ‘Best Price cash-and-carry stores’ is extremely innovative and unique which not only aims at prospering the local businesses technologically and economically, but also indirectly providing consumers a wide range of products at a cheaper price. Acquisition of Flipkart was yet another brilliant step to increase their income and reduce the competition in the e-commerce from Amazon. These strategies will surely make Wal-Mart strong enough to compete against Amazon and other competitors such as Jabong, Snapdeal for the market domination/leadership.


Supporting documents:

·       Supporting Document 1

Foundation, India Brand Equity, E-Commerce Report, 2018 <www.ibef.org>

·       Supporting Document 2

‘New Ecommerce Rules: Losses of Amazon and Flipkart to Go up Due to FDI Policy: Report - Times of India’ <https://timesofindia.indiatimes.com/business/india-business/amazon-flipkart-losses-seen-rising/articleshow/67859280.cms>

·       Supporting Document 3

‘For Walmart, Technological Innovations Come from India - The Hindu BusinessLine’ <https://www.thehindubusinessline.com/info-tech/for-walmart-technological-innovations-come-from-india/article26390125.ece>

·       Supporting Document 4

‘Walmart India Looks to Scale up Kirana Store Business after Flipkart Deal’ <https://www.livemint.com/>

 

Other Sources:

Amazon.com Inc., ‘Amazon and Whole Foods Market Announce Acquisition to Close This Monday, Will Work Together to Make High-Quality, Natural and Organic Food Affordable for Everyone’, Business Wire, 2017 <https://web.archive.org/web/20170830105021/http://www.businesswire.com/news/home/20170824006124/en/>

 

‘Amazon and Walmart Threatened by India Ecommerce Rules - CNN’ <https://edition.cnn.com/2019/01/31/tech/amazon-walmart-india-ecommerce-restrictions/index.html>

 

‘For Walmart, Technological Innovations Come from India - The Hindu BusinessLine’ <https://www.thehindubusinessline.com/info-tech/for-walmart-technological-innovations-come-from-india/article26390125.ece>

 

Form 8K – Walmart Inc. (U.S. Securities and Exchange Commission, 2018) <https://www.sec.gov/Archives/edgar/data/104169/000010416918000013/form8-kx212018.htm>

 

Foundation, India Brand Equity, E-Commerce Report, 2018 <www.ibef.org>

 

‘India’ <https://corporate.walmart.com/our-story/our-business/international/walmart-india> [accessed 28 March 2020]

 

Jain, Varun, ‘Walmart: Walmart Expects Ease of Doing Business in India to Get Easier’, The Economic Times, 2019 <https://economictimes.indiatimes.com/industry/services/retail/walmart-expects-ease-of-doing-business-in-india-to-get-easier/articleshow/69626146.cms?from=mdr>

 

Nair, Athira, ‘How Walmart’s Failed Acquisitions in Asia and Europe Can Guide Its Play for India through Flipkart’, 2018 <https://yourstory.com/2018/05/walmarts-failed-acquisitions-asia-europe-can-guide-play-india-flipkart>

 

‘New Ecommerce Rules: Losses of Amazon and Flipkart to Go up Due to FDI Policy: Report - Times of India’ <https://timesofindia.indiatimes.com/business/india-business/amazon-flipkart-losses-seen-rising/articleshow/67859280.cms> [accessed 28 March 2020]

 

Online, ET, ‘Walmart Deal Confirmed: What Walmart’s Flipkart Acquisition Means for India, Consumers and Its Arch-Rival Amazon’, 10 May, 2018 <https://economictimes.indiatimes.com/industry/services/retail/softbank-ceo-confirms-walmart-flipkart-deal/articleshow/64093437.cms?from=mdr>

 

Stimpson, Peter, and Alex Smith, Business and Management for the IB Diploma, 1st Editio (Cambridge University Press, 2011) <www.cambridge.org/9780521147309%0A>

 

 

Turner, Tim, and Tim Turner, ‘Our History’, in One Team on All Levels, 2019, pp. 1–8 <https://doi.org/10.4324/9781466500020-1>

 

 ‘Wal-e-Mart: How the World’s Largest Retailer Is Shaping up Its e-Commerce Strategy in India - The Economic Times’ <https://economictimes.indiatimes.com/industry/services/retail/wal-e-mart-how-the-worlds-largest-retailer-is-shaping-up-its-e-commerce-strategy-in-india/articleshow/64238984.cms?from=mdr>

 

‘Walmart India Looks to Scale up Kirana Store Business after Flipkart Deal’ <https://www.livemint.com/>

 

‘Walmart India Opens 24th “Best Price” Cash & Carry Store in India at Karimnagar, Telangana; Small Kiranas to Benefit Tremendously; District Gets 2,000 Direct & Indirect Jobs’ <http://www.wal-martindia.in/2019/03/12/walmart-india-opens-24th-best-price-cash-carry-store-in-india-at-karimnagar-telangana-small-kiranas-to-benefit-tremendously-district-gets-2-000-direct-indirect-jobs>

 

‘Walmart Investor Relations - Investors - Financial Information - Unit Counts & Square Footage’ <https://stock.walmart.com/investors/financial-information/unit-counts-and-square-footage/default.aspx>

 

Online, ET, ‘Walmart Deal Confirmed: What Walmart’s Flipkart Acquisition Means for India, Consumers and Its Arch-Rival Amazon’, 10 May, 2018 <https://economictimes.indiatimes.com/industry/services/retail/softbank-ceo-confirms-walmart-flipkart-deal/articleshow/64093437.cms?from=mdr>


Location: India

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