What is Flipkart? | CNBC Explains
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What is Flipkart? | CNBC Explains

Flipkart is India’s Amazon. It’s the
country’s largest online retailer. In 2018 retail giant Walmart announced its intention
to acquire a controlling stake in the company for $16 billion, making this the
largest e-commerce acquisition, ever. Flipkart was founded here in Bangalore in
2007 by Sachin Bansal and Binny Bansal, two Indian software engineers, that
happen to share the same surname. They both worked for Amazon in the U.S. before
returning to India to start their company. Like Amazon, Flipkart began
as an online bookstore. In its first full year of business, it delivered nearly
three and half thousand shipments of books. Now its website has 10 million page visits a day and
sells more than 80 different categories of goods, which includes everything from
food processors to yoga mats. This expansion has been supported by
the company’s own digital ecosystem. In 2009 it founded Ekart, its
in-house supply chain arm. Ekart is now India’s largest logistics company
delivering 10 million shipments a month for Flipkart, as well as independent
brands and sellers. It also owns PhonePe, an app
the company acquired in 2016, which helps facilitate electronic
payments throughout the country. In addition, Flipkart’s purchase of two
of India’s leading online fashion retailers, Myntra and Jabong ensured the company remained
the leading player in India’s online retail industry. Flipkart’s strong position in the market attracted
$1.4 billion of investment in 2017 from The Indian e-commerce market as a whole is set
to quadruple to $200 billion in the next eight years, and by 2034 it’s predicted to surpass the U.S. as the
second largest e-commerce market in the world. The predicted growth in e-commerce has increased
competition between the big online retailers. Amazon has been taking on
Flipkart in its own backyard. Both have been offering
massive sales and discounts pegged to Indian festivals as they
battle it out for more customers. While Amazon’s size and profitable cloud computing
service allows it to absorb these costs, Flipkart has suffered losses
in its struggle to compete. However, the Flipkart Group as a whole
still has the largest share of the market and remains the e-commerce
leader in India. Walmart’s online sales, however, account for
just a little more than three and a half percent of its business in the U.S. Acquiring Flipkart
gives them a considerable foothold in the sector. Yet when news of the deal broke, the American
retailer’s shares tumbled four percent with investors concerned that the company had
a long way to go before becoming profitable. The acquisition of a loss-
making business also cut Walmart’s profits at the end of 2018
and its earnings outlook for 2019. The company also warned that e-commerce
growth would be slower next year. For Flipkart, Walmart’s investment is seen by many as
a major boost to the company’s logistical operations. It will also help it move into
new areas like online groceries. Water, please. Along with a strong food supply
chain, Walmart’s financial support will also help Flipkart keep prices
low in its battle with Amazon. Several key investors have
exited the company, including co-founder Sachin Bansal,
and they leave with hefty profits. Venture capital firms Accel and Tiger Global invested
when Flipkart was valued at just $50 million. They have now pocketed more than 400 times
what they invested and still retain some shares. Softbank is also a big
beneficiary of the deal. Its Vision Fund invested $2.5 billion
in 2017 and in just over 12 months the Japanese company sold
its 20% stake for $4 billion. Co-founder Binny Bansal had planned to
stay on as the company’s chief executive but resigned after an internal investigation
into serious personal misconduct following an accusation
of sexual assault. He still owns 4.2% of the company
and remains a director on the board. Amid the controversy Walmart increased its stake in the
$20 billion company from 77 percent to 81.3 percent, offering another sign of its support of an online
retail market that is still small by global standards. The value and sale of Flipkart to a major corporation
like Walmart will likely encourage investors to see India’s e-commerce
market as an area of growth. Already the Indian startup Ola is competing
fiercely with Uber in the taxi aggregation market and both have Softbank
as a major shareholder. As the world’s major tech companies focus
more of their attention on India, Flipkart may be the first of many start-up success
stories emerging from the growing e-commerce space. Hi guys, thanks for watching our explainer on Flipkart.
To see more of our videos then check out these. So, do you think Flipkart has a chance against Amazon?
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