NEW DELHI | MUMBAI: Consumers can look forward to more discounts on mobile phones with a stronger Walmart-Flipkart entity and a moneyed Amazon set for an intense fight for a greater share of the devices pie which is among the largest revenue generators for ecommerce majors, said analysts.
Walmart, the world’s largest retailer, will also bring in immense offline organised retail expertise, which will help Flipkart create a complementary online-offline business which in turn can help handset brands expand the market by going into the smallest towns and cities, they said.
“Indian consumers would stand to gain immensely. From a devices point of view, Indian consumers are in awin-win position as they would be courted by Amazon and Walmart-Flipkart with deeper discounts to gain and retain customer loyalty,” said Prabhu Ram, head of industry intelligence group at research firm Cybermedia Research.
Rushabh Doshi, senior analyst from Singapore-based Canalys, said that the competition between the two ecommerce majors will mean handset vendors could negotiate better terms for doing business.
The Bentonville-headquartered retail giant on Wednesday said it will acquire 77% in Bengaluru-based Flipkart for $16 billion, where it will invest $2 billion as primary capital. Flipkart Group CEO and cofounder Binny Bansal said that the investment would fuel the company’s ambition to deepen its connection with buyers and sellers, creating the next retail wave.
For online retailers Flipkart and Amazon, mobile phone is among the largest revenue generating category, which is why both have been focusing on expanding this segment by adopting incentives such as no-cost EMIs, interest free schemes and exchange programmes.
Mobile phone buyers can expect good news from Walmart-Flipkart deal
As of February, Flipkart had cornered a 51% share of the online smartphone market in 2017, while Amazon had a 33% share, as per Counterpoint Research.
Most handset makers did not comment on the development, while some said it is early days to expect any immediate changes in business terms.
At present, online sales of mobile phones make up only 33-34% of total retail sales in India, leaving a lot of headroom for expansion into the unorganised Indian retail market, even as customer spending is expected to increase to $60 billion by 2020.
“All in all, this means online as a channel and medium cannot be if ignored, since headroom for growth is huge for Walmart and Amazon in a yet underpenetrated market like India… it will be in every brands’ long term interest to work much closely with the online partners, make models specific to the platform, use the learnings from online users, while keeping in mind continuing importance of offline channel,” said Navkendar Singh, associate research director at International Data Corporation (IDC) India.
He expects both online platform players to be more aggressive now in terms of pricing, availability of more and new devices and reach vis-a-vis offline channel.
Cybermedia’s Ram though said that Flipkart would be in a better position to out-compete Amazon as it would leverage Walmart’s know-how and expertise in retail infrastructure, marketing, supply chain, and logistics.
Over the long run though, both parties will be able to build their strategies together as they bring their respective individual strengths in cash-and-carry and online on the table together, he added.
“Flipkart will have to look into its exclusive deals with both Indian and global brands because Walmart may come in with its global alliances which may overshadow the Indian ones,” said Jessie Paul, chief executive officer of marketing advisory firm Paul Writer in Bengaluru.
India’s organised retail business in the offline space is still underpenetrated with the government allowing 51% FDI in multi-brand retail, in partnership with a local player, though single brand retail does not have any impediments. While the government has not scrapped the 51% rule allowing FDI in multibrand retail, it has not encouraged foreign players either.