Wal-Mart Ups Game Against Amazon, To Buy Stake In Flipkart

Wal-Mart Stores Inc. (NYSE:WMT) hogs the limelight again. The company seems to have set fire to the world of online retail, with its rigorous steps to counter Amazon’s (NASDAQ:AMZN) growing dominance. Well, rounds were made yesterday that the world’s largest retailer is in advanced talks to buy a considerable minority stake in India’s leading e-commerce destination, Flipkart — Amazon’s biggest rival in India.

Incidentally, sources revealed that Wal-Mart could acquire about 15-20% stake in Flipkart, targeting an investment of about $750 million-$1 billion. While both Wal-Mart and Flipkart didn’t confirm the news, we believe that the news itself is an alarm for Amazon, which has long been trying to match up to Flipkart’s market share in India.

Can Stake in Flipkart be a Game Changer?

While Wal-Mart already operates in India under 21 wholesale stores, its ability to establish its own brick-and-mortar stores gets restricted by the huge costs associated with setting up stores in a nation like India, alongside certain limitations on foreign ownership for multi-brand retailers. Thus, if this deal materializes, it is likely to strengthen Wal-Mart’s position against Amazon, by helping it leverage the large market Flipkart caters to.

On the flip side, investment from Wal-Mart will benefit Bengaluru-based Flipkart by helping it boost its grocery business. Flipkart, which sells almost everything ranging from cosmetics to electronics, has been concentrating on the food and grocery space — another venture already exploited by Amazon. At such a juncture, investment from Wal-Mart is likely to be a perfect choice, given its growing experience in the space.

That said, it looks like Wal-Mart and Flipkart are joining forces against the e-commerce king Amazon.As for Wal-Mart, this retail biggie has explored every nook and cranny to combat Amazon’s growing dominance. In fact, it hasn’t even been a week since this big-box retailer announced plans to foray the e-book market and expand its online grocery services to Japan, though a strategic partnership with Japanese e-commerce firm, Rakuten Inc.

Prior to this, rounds were made in December 2017 that this supermarket giant started selling meal-kits online — a card already played by Amazon previously. Further, the big-box retailer has taken several e-commerce initiatives, including buyouts, alliances, and improved delivery and payment systems. Out of all its e-commerce initiatives to stand strong against Amazon, Wal-Mart’s speedy expansion in the booming online grocery space steals the show.

These splendid endeavors have helped this Zacks Rank #3 (Hold) company put up a robust past record, driving its shares 62.7% in a year, faring even better than the industry’s rise of 51.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

In fact, Wal-Mart is not the only retail which is taking incessant strides to stay firm in the Amazon-dominated retail world. Retail behemoths like Target (NYSE:TGT) , Kroger (NYSE:KR) and Kohl’s among many others are also undertaking several efforts to make the most of the evolving shopping trends. Coming back to Wal-Mart, investment in Flipkart will likely be one of its most tactful moves to take on Amazon and aptly justify its plan of emerging from Wal-Mart Stores to Walmart.

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