Flipkart's big role: How the e-commerce giant has become central to Walmart's growth strategy

IN MAY 2018, when Walmart Inc., the world’s No.1 retailer, bought a 77% stake in Flipkart, the $16 billion it paid was a record purchase price for any ecommerce company worldwide. Flipkart, founded in 2007 by Sachin and Binny Bansal, was backed by leading global investors Tencent Holdings Ltd., Tiger Global Management LLC, and Microsoft Corp.

The acquisition worked. By December 2023, Walmart had increased its stake to 81% and is preparing to list Flipkart.

An earlier Walmart initiative had not. Walmart has been in India for over two decades, beginning by buying assorted items for its stores worldwide from an outpost in Bangalore in 2002, when it was Wal-Mart Stores, Inc., and India’s tech capital was yet to become Bengaluru. Since then, it has sourced products worth around $30 billion. Its target is $10 billion a year from 2027.

In 2007, it joined hands with Bharti Enterprises, then India’s largest telecom operator, to launch a wholesale food and grocery business. German giant Metro AG’s Metro Cash & Carry was already there since 2003. The first Walmart-Bharti store came up in Amritsar, Punjab. The hyphen failed, rent asunder by unclear government policies on foreign direct investment in modern retail and competition from small grocers.

This time, the Flipkart acquisition has embedded Walmart (which dropped the hyphen in December 2017) in India’s tech-driven growth story. Kathryn McLay, president and CEO of Walmart International, says that at the core, “Walmart is an omnichannel retailer dedicated to helping people save money and live better.”

“Walmart in India combines our global ecosystem with deep local insights to foster economic growth and serve customers through strategic investments in ecommerce, financial services, supplier development, and philanthropy,” says McLay, who became CEO of the international business of Walmart in 2023 and sits on the board of Flipkart.

Walmart now has Flipkart, which connects over 1.4 million sellers, mostly small enterprises; fashion e-commerce brand Myntra; Flipkart Wholesale, the digital B2B marketplace; Ekart, its supply and logistics arm; fintech offerings through SuperMoney and value-conscious shopping platform Shopsy.

In 2021, a year after Covid-19, Flipkart acquired Cleartrip, an online travel and leisure aggregator. In 2022, it acquired SastaaSundar.com, a digital healthcare and pharmacy rebranded as Flipkart Health+. In August 2024, it entered quick commerce with Flipkart Minutes. Flipkart also has Flipkart Ventures, a $100 million fund that has invested in start-ups.

Walmart has not stopped investing in Flipkart after the acquisition. In 2021, Flipkart raised $3.6 billion led by Walmart. The investment valued Flipkart at $37.6 billion.

In 2023, Walmart paid nearly $3.5 billion to acquire the shares of early investors Binny Bansal, Tiger Global, and Accel. In the latest $1 billion multi-tranche funding round, Google’s parent Alphabet brought in $350 million for a minority stake, and Walmart brought the rest.

Fintech Play Through PhonePe

Walmart is reaping a good harvest from India’s fintech sector via PhonePe, a payment app that Flipkart had acquired in 2016 before Walmart’s entry. Karthik Raghupathy, PhonePe’s head of Strategy and Investor Relations, said revenues rose nearly 74% to ₹5,064 crore in FY24 and losses were down. In the past five years, PhonePe has grown at a CAGR of 95%, with revenue shooting up from ₹184 crore in FY19 to ₹5,064 crore in FY24. Raghupathy says PhonePe is focused on process automation and unit economics, crossing and upselling its financial products, and improving efficiencies.

PhonePe decided in early 2019 to ditch the ‘cashback’ strategy that had fuelled fintech companies fighting to get and keep customers, Raghupathy says. From over ₹950 crore in FY19, cashbacks were down to ₹15 crore in FY24. “We were also the pioneers in introducing a nominal platform fee on recharges and utility transactions,” Raghupathy says.

PhonePe was the first payment app using the government’s UPI or unified payments interface, a digital system that allows one app to be linked to many bank accounts and enables secure online payments. In November 2024, PhonePe had nearly 48% of all UPI payments, ahead of GooglePay’s 37%. With India pushing UPI in other countries, PhonePe created an international payments division. “With the right blend of technology, regulatory understanding, and market insight, we can create new payment solutions that meet the evolving needs of businesses and consumers,” Raghupathy says.

PhonePe, after being spun off from Flipkart in December 2022, created Pincode, an e-shopping app that partners with offline stores to supply buyers in a particular PIN code area. Pincode rides on the ONDC or open network for digital commerce, another government initiative. With Pincode, PhonePe does not need to spend money to build ‘dark’ stores to stock the products. Offline stores now have real-time inventory, order management, and logistics capabilities that were previously available only on e-commerce platforms.

For the long term, Walmart has a philanthropic outfit, Walmart Foundation, which helps India’s small-holder farmers, or those with uneconomical land holdings, who account for 85% of agricultural output, to improve their linkages with markets, get collectivised and aggregate produce for better prices. It aims to improve the lives of a million such farmers by 2028.