Walmart-backed Flipkart has suffered a significant blow to its business and hopes of expansion as the government recently blocked its foray into the food retail space.
Earlier this week, reports confirmed that India’s Department for Promotion of Industry and Internal Trade told Flipkart that its move into the country’s food retail business was against its regulatory guidelines.
Flipkart Suffers a Crushing Blow
Citing a source close to the matter, TechCrunch explained that the department, which forms a part of India’s Ministry of Commerce and Industry, has blocked Flipkart’s proposed expansion, although it failed to give any further reasons why.
The move is coming as Flipkart was preparing itself to burst onto the Indian food retail space. Thanks to backing from a competition-hungry Walmart, the firm announced last year that it had registered an entity known as “Flipkart Farmermart Pvt Ltd.”
The entity, which Flipkart confirmed was in accordance with regulatory requirements, had formed part of Flipkart’s mission to tap into India’s booming agriculture space.
Flipkart revealed in a regulatory filing that it had gotten the authorization to invest as much as $258 million into the new venture the Economic Times reports.
Company chief executive Kalyan Krishnamurthy also added that the firm would be looking for avenues to invest more in India’s agro-ecosystem supply chain. As he explained, the goal was to traverse India’s food retail market and ensure that the country’s multitude of farmers can improve their income. At the same time, the company would ensure that millions of customers across the country can get access to quality food products at affordable prices.
Sadly, however, this isn’t to be. Despite the setback, however, Flipkart is looking to refine its effort and give the venture another. Speaking with TechCrunch, Rajneesh Kumar, the firm’s Chief Corporate Affairs Officer, explained that they were evaluating their strategy and were looking towards renewing their application.
“At Flipkart, we believe that a technology and innovation-driven marketplace can add significant value to our country’s farmers and food processing sector by bringing value-chain efficiency and transparency. This will further aid in boosting farmers’ income and transform Indian agriculture,” he said.
Walmart is Losing Ground in India
Apart from being a significant blow to Flipkart, this is also a problem for Walmart. The company might be one of the top retail brands globally, but it is steadily losing market share to Amazon.
Walmart already ceded the American retail and e-commerce space to Jeff Bezos’ behemoth, and expanding overseas is a great way to combat that. With India being one of the largest global markets, the firm has focused its efforts on the Asian country – hence, its purchase of Flipkart in the first place.
However, this restriction could prove problematic, especially as Amazon is now running food delivery services in India. Last week, Amazon finally launched Amazon Food, its food delivery service, in the country.
Like Walmart, Amazon already made big plays in India. The firm has invested over $6 billion in the country to date. While it planned to launch its food delivery service earlier in the year, it eventually moved the launch due to the coronavirus pandemic. Now, Amazon Food for India is here.
Of course, Amazon Food will have some fierce competition. However, several top industry players have been on weak footing due to the pandemic. Swiggy and Zomato, two of the country’s largest food delivery services, have had to cut staff significantly to weather the pandemic’s effects. Uber Eats is also no longer available in the country.
So, it’s a perfect time for anyone looking to capitalize on the pandemic to strike. Amazon already did, but Flipkart – and, by extension, Walmart – appears to be lagging.