Biyani says e-commerce companies in India barely contribute to less than 0.2% of total retail sales and would never be able to make money in India.
New Delhi, April 27, 2018: Buying a majority stake in India’s largest online retailer Flipkart will give Wal-Mart Inc the arsenal it needs to fight its online rival Amazon. Walmart is likely to reach a deal soon to buy 86% stake in India’s top e-commerce player in what could be the US retail giant’s biggest acquisition of an online business. Walmart could pump in around $8 billion in a mix of primary and secondary purchase of shares, valuing Flipkart at nearly $20 billion.
According to report published in retail.economictimes.indiatimes.com even as Walmart rushes to acquire Flipkart to challenge Amazon, India’s pioneer retailer Kishore Biyani still wants to fight online retail with a unique strategy, Retail 3.0, which makes use of online-to-offline model. Biyani’s model blends technology with brick and mortar retail.
Amazon and Flipkart could be pouring billions of dollars into online retail but India’s retail king won’t be convinced. Comparing e-commerce companies to typewriters which gave way to computers and died down, Biyani has said that e-commerce companies in India barely contribute to less than 0.2% of total retail sales and would never be able to make money in India. Riding on its Retail 3.0 model, Biyani’s Future Group is looking to more than treble revenue to Rs 75,000-1 lakh crore.
India’s online retailing business is estimated to grow by more than 1,200% to $200 billion (Rs 13,30,550 crore) by 2026, up from $15 billion in 2016, according to a Morgan Stanley report last year. It estimates online retail to account for 12% of the country’s retail market by then, up from just 2%.
It is this vast growth opportunity in online retail in India which has triggered the war between Flipkart and Amazon. However, Biyani’s calculation is different. According to him, nearly 10-15% customers are acquired online-to-offline (O2O) by Future Group, and he expects it to go up to 35%, especially through online promotions. He says understanding India is not easy for a retailer. A global retailer needs to adapt to the local style of retailing, he says according to retail.economictimes.indiatimes.com
Even online retailers have realised that brick and mortar is not going to die away. India’s physical retail market is estimated to top $1.1 trillion by 2020, from $680 billion at present, with organised retail expected to grow at 20% per annum, according to a study by MRRSIndia.com and Assocham.
Amazon last year launched the checkout-free Amazon Go store in Seattle and also bought Whole Foods for $13.7 billion, a deal that helped the online giant get a network of about 500 outlets in the US and UK. That also gave it access to the grocery segment, allowing convergence with its own subscription pantry delivery service. In the past two years, Alibaba has acquired major stakes in retailers such as Suning Commerce Group Co., Lianhua Supermarket Holdings Co. and Intime Retail Group Co.
Now it is commonly believed that the doomsday scenario of online finishing off the brick-and-mortal retail was wrong. It is the hybrid model that would work in the long run. That’s why Biyani’s Future Group, which controls nearly a third of the country’s organised food and grocery market, too may be an attraction for online retailers. Biyani had met Jeff Bezos of Amazon in the US in January to discuss a possible alliance . Biyani has also travelled to China to meet Alibaba officials in the recent past to study its model and see if that can be replicated in India according to retail.economictimes.indiatimes.com
In the Amazon-Walmart war, it seems either of the parties will have to enlist home-grown warrior Biyani. In fact, when Biyani spent nearly an hour with Bezos at Amazon’s Seattle headquarters in January, Biyani spoke of how Alexander’s invasion of India had met with fierce resistance, leading the all-conquering Macedonian march to retreat, albeit temporarily. Biyani was trying to draw a parallel how Amazon could use an ally that controls nearly a third of the country’s organised food and grocery market.