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Walmart may exit Flipkart, thanks to new FDI rules!

by Apparel Resources News-Desk

05-February-2019  |  2 mins read

Walmart-Flipkart
Image Courtesy: http://financialviews.in

Wall Street giant Morgan Stanley recently disclosed that Walmart may exit Flipkart in a similar way to what Amazon did in China if the retailer was not able to see a long-term path to profitability. The new FDI norms of e-commerce recently kicked in and has thrown a spanner into the plans of the e-tail giants in India.

According to the new report titled ‘Assessing Flipkart Risk to Walmart EPS’ by Morgan Stanley  “an exit is likely, not completely out of the question as Indian e-commerce market is becoming more complicated. The new rules bar online marketplaces and their group companies from owning their vendors and prohibits them from controlling the inventory sold on their platforms.”

Morgan Stanley mentioned that Flipkart may need to remove approximately 25 per cent of its products from its site due to the new rules. Smartphones and electronics will have the greatest impact because of the necessary changes to supply chains and existing exclusivity deals.

Flipkart derives its maximum revenue from this category and could face meaningful disruption and top-line pressure in the near term. Historically, the e-commerce company’s gross sales have been driven by smartphones and electronic products which are high priced.

While the new norms certainly don’t help Walmart, the company is very confident. “Despite the recent changes in regulations, we remain optimistic  about the e-commerce opportunity in India given the size of the market, the low penetration of e-commerce in the retail channel and the pace at which it is booming,” said Walmart’s spokesperson

Moreover, as Walmart scales in India, the company will continue to partner in order to create sustained economic growth across agriculture, food and retail. Also, the future investments will support national initiatives and will bring sustainable benefits to the country.