Walmart’s plans to acquire Flipkart, Indian online marketplace, are not progressing smoothly. After the big box retailer made known its intentions, online retail giant Amazon reportedly was eyeing making a competing offer increasing the prospects of an expensive bidding war. But while that has not materialized in the meantime eBay has emerged as a speed bump for Walmart since it is one of the investors and partners in Flipkart.
Last year eBay made an investment worth $500 million in Flipkart according to Recode giving the U.S. tech firm a stake of 5.44%. The deal also saw Flipkart take control of the Indian operations of eBay. During the same period Tencent and Microsoft also made investments in the Indian marketplace resulting in Flipkart raising approximately $1.4 billion.
Part of the reason for the deal was to assist in making the inventory of eBay accessible to consumers in India while at the same time giving users of eBay access to the merchandise on offer on Flipkart. One problem with the deal was that it was an exclusive agreement between the two companies with regards to pursuing cross-border trade opportunities.
The exclusive agreement will run for 4 years and could include merchandises with the exception of groceries. At the time the chief executive officer of eBay, Devin Wenig, indicated that this part of the deal was what he most excited about. In the event that Walmart acquires a majority stake in Flipkart the big box retailer will not be in a position of negotiating merchandise deals with the Indian marketplace due to the fact that the agreement with eBay is exclusive.
No easy way out
Walmart will thus be left with no choice but to either bide its time waiting to the deal to elapse in around three years or undertake negotiations with eBay. If Walmart chooses the former it will result in Amazon increasing its dominance in India while the latter option will raise the price of the stake it wants to acquire in Flipkart. Currently Flipkart is valued at approximately $12 billion.
After the United States and Chine Amazon views the Indian subcontinent as one of the key growth markets. The Seattle, Washington-based retail giant has allocated $5 billion to grow its Indian business. According to estimates the gap between Amazon and Flipkart has been narrowed significantly in the recent past. Per Forrester Research India’s online retail sales are expected to reach a level of $64 billion by the year 2021.