Month: May 2018

Last year, eBay appeared to throw in the towel in India after it sold its business in the country to Flipkart and took a minority stake in the country’s e-commerce leader. Now, eBay is making a u-turn.

In the wake of Walmart’s intention to buy a controlling stake in Flipkart for $16 billion, eBay has announced that it is among the investors that will be selling its stake in the business, in eBay’s case for gross proceeds of $1.1 billion. And along with that, it said it plans to relaunch eBay India, focusing not on domestic sales as it had done previously, but on cross-border sales: selling into India from abroad, and from India to other markets.

The short announcement doesn’t give too many details how it will progress on these future plans, but as part of it, eBay confirmed that it will be ending its strategic deal with Flipkart, which had included a license for Flipkart to use eBay.in and for the two companies to cross-promote products between the two platforms.

“We plan to relaunch eBay India with a differentiated offer to focus initially on the cross-border trade opportunity, which we believe is significant,” the company noted in a statement. “We believe there is huge growth potential for e-commerce in India and significant opportunity for multiple players to succeed in India’s diverse, domestic market.”

The announcement is not too surprising. India represents massive potential: the populous country is the second-biggest economy in Asia, and one of the fastest-growing globally, with a digitally-savvy population (35 percent of all Indians use the Internet, making it the second-biggest market in the world). In that regard, it would have been a surprise, and possibly a foolish choice, to retreat from India completely in the wake of Walmart’s acquisition.

On the other hand, eBay has had a mixed track record when it comes to leveraging the market opportunity. In addition to its own site that it had sold to Flipkart, eBay was a repeat investor in Snapdeal, another e-commerce marketplace in the country that has fallen on challenging times amid fierce competition in the market. Snapdeal has in the last year laid off staff, struggled with finances and failed to close an acquisition deal with Flipkart.

In a positive light, there is still a lot to play for, and by offering a differentiated opportunity focusing on cross-border sales, eBay could exploit a gap in the market that Walmart will not have the appetite to pursue. EBay doesn’t state this, but in an ideal world, it’s going into its plans with its eyes open, and based on purchasing patterns it’s been seeing in and out of the country in recent years.

We’re contacting eBay to see if the company can give us more details and we’ll update this post as we learn more.

from TechCrunch

Naspers, the South African tech and media conglomerate, continues to have an incredibly hot hand when it comes to global tech investment.

Famous for owning a huge chunk of the Chinese Internet powerhouse, Tencent and a big chunk of Mail.ru, Naspers just made $2.2 billion off of the sale of Flipkart to Walmart. 

The South African company had an 11.18% stake in Flipkart and the sale represents an IRR of 32%, the company said.

Naspers originally backed Flipkart five years after the company’s launch in 2007 and had invested roughly $616 million into the company since that time.

Naspers said that proceeds from the sale of Flipkart would be funneled back into the company’s balance sheet to fuel the growth of the company’s own classifieds, online food delivery, and fintech businesses globally.

With Flipkart out of the portfolio, Naspers still holds a huge chunk of online tech real estate in India. The company has stakes in PayU, a payment and fintech company; OLX, a classifieds business; the online travel business MakeMyTrip, and Swiggy, a food delivery company.

from TechCrunch

Walmart has opened up on the thinking behind its $15 billion majority investment in Flipkart, and perhaps the most interesting facet is that the retailer plans to export ideas from the Indian e-commerce firm to the rest of its global business, including the U.S..

Walmart’s decision to follow Amazon into India is a testament to huge potential growth in the market. Internet penetration is tipped to cross 500 million this year and a rising middle-class emerging, all of which led Walmart CEO Doug McMillon to describe the deal as “a unique opportunity in a market with significant long-term growth prospects” — but the aspirations run further.

“At Walmart, we’re learning how to build — and how to partner to build — retail ecosystems around the world. India will now become a key center of learning for our entire company,” he said on a call with analysts following the announcement of the deal.

McMillon credited Flipkart for more than just an e-commerce business.

The company’s verticals span electronics, fashion and more, but Flipkart’s management team consistently returned to other services including its mobile payment arm, supply chain business than does 500,000 deliveries daily and more. They also dropped a hint at the potential to do groceries in the future, for one.

That “ecosystem” play is something that is quite unique to Asia, particularly in China, and it is an area where Walmart believes it can glean operational intelligence and potential strategy for other markets, including the U.S..

“Not only is [Flipkart] innovative [with the] problem-solving culture that they have, but they are doing some great work both in the AI space, how they are using data across their platforms but particularly in terms of the payment platform that they’ve created through PhonePe,” Judith McKenna, Walmart COO, said on the call.

“All of those things we can learn from for the future and see how we can leverage those around the international markets and potentially into the US as well,” McKenna added.

That admission is notable, and it stands to reason that Walmart — a traditional offline retailer — might seek to lean on Flipkart’s technical expertise to build out its online or tech-enabled businesses elsewhere in the world, particularly with Amazon entering offline via its Whole Foods deal. That helps bring more immediate returns since, as Walmart’s executives admitted, Flipkart isn’t likely to turn a profit any time soon since it is focused on chasing scale in India.

There’s also some synergy with Walmart’s other recent star acquisition.

McKenna added that Marc Lore, the founder of Jet.com which Walmart acquired last year for $3 billion, had been involved in scouting out Walmart during due diligence. She added that, for now, he wouldn’t be a part of the Flipkart business.

“Maybe someday we might involve him, but right now there’s plenty to do in the U.S. business and that’s what he’s focused on,” McKenna concluded.

Walmart already has an international business — which includes a physical retail footprint in India — but McKenna said the management team is “very interested” in the potential to expand Flipkart outside of India to growth that global presence, presumably using many of the aforementioned learnings taken from the Indian market.

“[International expansion] aligns with the [Flipkart] management team’s ambitions, it aligns with an operating model that we [at Walmart] are comfortable with working with. There’s no timeframe on that but it’s something that for the future we are considering,” she added.

The expansion makes sense since Walmart has spent the last couple of years regrouping its global efforts. It exited China in 2016 — instead opting for a partnership with e-commerce giant JD.com — and this month it retreated from the UK after selling its Asda business to rival high-street retailer Sainsbury’s. Perhaps its time to examine upcoming markets worldwide? In which case the $16 billion Flipkart deal begins to seem a lot more strategic.

from TechCrunch

The rumors are true: Walmart has bought a controlling stake in India’s Flipkart. This isn’t a straight-up acquisition, however, because, rather than going it alone, the U.S. retailer is enlisting strategic allies as it takes its fight to Amazon in a new region.

Walmart has an existing offline retail business in India, but enter the online space puts it up against Amazon, which has made massive strides since entering India in 2012.

That perhaps calls for something special, which is one reason why Walmart is buying just 77 percent of Flipkart and leaving space for others with expertise to come join.

Walmart confirmed that “some” existing investors will retain their stakes, including Tencent — the $500 billion Chinese giant — and Tiger Global, both of which have board sets, and Microsoft, which was part of a $1.4 billion investment last year. Added to that, Flipkart co-founder Binny Bansal has committed to stay retain his shares, although there’s no word on fellow co-founder Sachin Bansal who had been tipped to move on.

Beyond those three strategic Flipkart backers, Walmart said it is in ongoing discussions with “with additional potential investors who may join the round.”

Google is one who has been linked with a deal but you can imagine that Walmart — very much a physical retail specialist — will be looking to tap the world of tech and Asian partners to help gain an advantage over Amazon, which is broadly thought to have closed the gap on Flipkart in recent years.

Walmart is indicating that the new backers will buy a part of its equity if they invest, but it said it will “retain clear majority ownership” regardless of who joins.

“One of the things that was important to us here was having partners alongside us as well. So having Tencent, Microsoft and Tiger Global who are already investors in this business is really powerful in terms of the model that we’re creating,” Judith McKenna, Walmart COO, said on a call with investors following today’s announcement.

“[Flipkart] will be run through an independent board who will have some Walmart representation. We think that structure will best keep the entrepreneurial side of this business and guide it strategically, too,” McKenna added.

Walmart declined to give a timeline on when it might have news about the prospective investors.

Despite that, a number of investors have exited entirely with impressive returns, including SoftBank — which sunk a then-Indian record investment into Flipkart via its Vision Fund last year — Naspers and eBay.

In the more immediate future, Walmart is putting $2 billion of fresh capital into the business which Flipkart will be able to spend on growth and existing strategies.

Interestingly, too, Walmart is open to allowing Flipkart to IPO as a listed subsidiary in the future. That would help maintain incentives for employees and fulfill the ambition of management, McKenna said.

from TechCrunch