Walmart Acquires India’s Flipkart in a $16 Billion Deal
The Walmart vs. Amazon battle just got more intense after the former announced on Wednesday that it had acquired a 77 per cent stake in India biggest ecommerce company, Flipkart.
Walmart’s $16 billion Acquisition
Walmart declared on Wednesday that it has officially bought a $16 billion stake in India’s Flipkart in one of the biggest acquisition of 2018.
The move marks the beginning of a new war between Amazon and Walmart to win over the emerging markets in Asia. The news of Flipkart’s acquisition wasn’t received well on the Wall Street since Walmart’s shares dropped by 4 per cent the same day.
India’s ecommerce giant is already a step ahead of rival Amazon in its local market after it acquired a tech company that uses text to speech technology for various languages spoken in India – a feature that Amazon’s AI assistant still lacks.
After acquiring the digital industry, Flipkart is now aiming to target the lower-income demographic where the online shopping trend hasn’t caught up yet.
On Tuesday, the ecommerce group announced a complete takeover of Liv.ai, a Bangalore-based startup which has developed unique software that uses artificial intelligence to create an interactive experience for local smartphone users who can issue voice commands in 10 indigenous languages spoken in the country, from Hindi to Malayalam.
Expanding Service to Other Languages
Many are speculating that the acquisition deal cost Flipkart $40 million, although the company itself was acquired earlier this year by Walmart for $16 billion.
The ecommerce group has yet to reveal the details of the buyout. Liv.ai’s acquisition shows that there is a growing consensus among key industry players that in order to achieve more growth, they will have to step out of their current market of wealthy, educated Indians who are accustomed to online shopping, and target lower middle class individuals who have less spending power and don’t understand English.
Flipkart’s CEO, Kalyan Krishnamurthy, says that the company is shifting its focus towards to smaller Indian cities where there is a new wave of growth of internet users. Since most of these cities have their own vernacular, when they do start using the internet, they would want to interact with it in their local languages.
Due to complexities of these languages, it could become hard for them to type out commands on a traditional keyboard. Krishnamurthy says that speech-to-text technology will become a useful tool for new shoppers who wish to explore the world of ecommerce in their own vernacular.
According to Google statistics, almost 390 million Indians use internet every day but only 40 per cent of this population makes online transactions. A joint analysis by Bain & Company and Omidyar Network found that the ecommerce target market in India is overwhelmingly skewed towards people with higher incomes. This reflects the industry’s failure to expand into the country’s shifting online demographics beyond the English-speaking internet users.
Unlocking Sales Potential in Emerging Markets
According to KPMG, the English-speaking Indians were the first ones to get on the internet, and by 2011, there were around 68 million web users in the country who used English as their preferred language whereas the remaining 42 million users interacted with the internet in their local language.
Five years later, the non-English speaking internet user group has outnumbered the English speakers by a margin of 234 million to 175 million. The difference could become even steeper by 2021, according to KPMG’s forecast which suggests that non-English speaking population could 536 million in comparison to 199 million English speakers.
According to Brain’s report, the ecommerce industry could unlock $50 billion in sales if they push their services to new internet users.
Both Flipkart and Amazon India have a web interface only available in English, but neither of the two ecommerce rivals has revealed when it is planning to expand services to local vernaculars. Other tech companies have already expanded offering to a host of local languages spoken in India.
Quikr, an online advertisement service, is now available in seven local languages whereas the mobile app, Dailyhunt, features more than a 100,000 articles daily in 14 different languages. This expansion has allowed the app to seize English and non-English speaking demographics. Dailyhunt has been downloaded on 150 million devices so far.
Will Walmart’s expansion in India give it a competitive edge over Amazon?
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