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After Acquisition, Flipkart Plans To Consolidate Loss Making Walmart Ops

After Acquisition, Flipkart Plans To Consolidate Loss Making Walmart Ops

Flipkart may consolidate Walmart’s ‘Best Price’ stores by shutting down those that are unviable

Flipkart may turn some of the Best Price stores into warehouses with greater focus on ecommerce operations

Last month Flipkart acquired parent company Walmart’s B2B wholesale chain to launch its own service ‘Flipkart Wholesale’.

Indian ecommerce unicorn Flipkart, having recently acquired its parent company Walmart’s loss-making B2B wholesale franchise ‘Best Price’, is exploring ways to consolidate its operations. The company may do this either by shutting down unviable ‘Best Price’ stores, of which there are 28 operational across the country, or turning them into warehouses with greater focus on ecommerce operations, sources told Times of India. 

Last month, Flipkart acquired parent company Walmart’s B2B wholesale chain, Best Price Modern Wholesale, to launch its own service ‘Flipkart Wholesale’ in a bid to expand its presence in the food and retail segment. Flipkart Wholesale is expected to launch operations on a pilot basis this month in the fashion and grocery categories. Further, Walmart India employees are expected to join the Flipkart group next year in Bengaluru. 

Walmart doesn’t sell directly to consumers in India, but through organised wholesaler or cash-and-carry operators that sell merchandise to local kirana stores, hotels and catering firms. Besides Best Price Modern Wholesale, it also runs a membership-based programme that counts more than one million members as of October 2019.

In the financial year 2019, Walmart India wholesale unit that runs Best Price brand doubled its year-on-year net loss at INR 172 Cr. Simultaneously, it also noted an 11% spike in its revenue at INR 4,065 Cr. At the time, Walmart specified that the losses had mounted as it had been investing heavily in its technology infrastructure to enhance its omnichannel capabilities and “people development”.

Meanwhile, the All India Online Vendors Association (AIOVA), which claims to represent the interest of more than 2000 sellers, has approached the Competition Commission of India (CCI) to protest against Flipkart’s reverse acquisition of parent company’s Walmart’s B2B wholesale chain. AIOVA has said that the acquisition isn’t tenable since a CCI investigation against Flipkart for abuse of dominant position is currently underway. 

The association’s legal counsel Chanakya Basa, in a series of tweets posted on July 23, talked about how the deal between Flipkart and Walmart, “raises competition law concerns for a variety of reasons.” Basa talked about the National Company Law Appellate Tribunal (NCLAT) initiating an investigation against Flipkart earlier this year, as it was alleged that the ecommerce giant was selling goods, through its B2B channel, to a web of preferential sellers like WS Retail and Tech-Connect Retail, among others, at massive discounts.

In its ‘Market Study On Ecommerce In India’, published in January this year, CCI noted that ecommerce companies selling goods through their B2B channels to preferential sellers was a common practice. 

AIOVA has said that Flipkart’s reverse acquisition of Walmart would be detrimental to the interests of sellers.