Walmart may step up India sourcing for global market
Walmart will likely step up sourcing from India for its global operations as the Flipkart acquisition gives it access to the huge supplier base of the ecommerce company.
The US-based retailer currently sources goods worth over a “couple of billion” dollars, such as apparel, generic medicines and handicrafts, from Indian suppliers such as Welspun and Dr Reddy’s for its stores in the US, UK, Canada and South America, said a person familiar with the matter.
Walmart’s sourcing from India is still small compared with that from China, which ships some $50 billion worth of goods to the company’s stores, but the combination of its Best Price cash and carry business and Flipkart is now expected to help boost India’s contribution. The bigger base of suppliers from Flipkart will offer it more opportunities to source for its retail outlets abroad, while also allowing the suppliers a wider exposure to overseas markets, the person said.
While Flipkart had an association with eBay to take sellers global, it ended on Wednesday as eBay cashed out and decided to relaunch its website.
Walmart on Wednesday said it would support small business and ‘Make in India’ through direct procurement as well as provide increased opportunities for exports through global sourcing and ecommerce. Analysts said the India market opportunity for Walmart will in fact be meatier than that from building a larger supply chain to source goods for global markets.
“Nothing was stopping them from sourcing (from India) anyways.
Walmart might increase it a little bit more. But I don’t see a significant change,” said Satish Meena, an analyst at research firm Forrestor.
“They are going to bring a lot of products from outside to Indian customers, which they were not able to sell earlier. They will now channel that in India through Flipkart.”
Walmart has over 20 Best Price cash and carry outlets in India. In fiscal 2017, the India unit posted revenue of Rs 3,641 crore, of which two-thirds came from sales of food and groceries.
Walmart’s sourcing and negotiating power for Best Price is what Flipkart is looking for, said Meena, adding that the Indian retailer could “get an edge on food and private” labels with the deal.
“Between cash and carry business and Flipkart, Walmart will focus more on India. They have the backend systems and expertise in large-scale sourcing. They will focus on expanding the 100 million (Flipkart) customers,” said Harminder Sahni, the founder and managing director of Wazir Advisors, a retail advisory.
Walmart is also looking to consolidate its India operations in Bengaluru, where Flipkart is based.